Good morning and welcome to our monthly House View. Let’s start with the big picture. In the United States, the “Goldilocks” scenario—characterized by moderate growth and inflation—remains intact. Economic activity continues to show resilience, even in the face of the recent government shutdown.
In October, the Federal Reserve cut interest rates again to support the slowing job market. However, inflation remains elevated, and the Fed is increasingly divided. While some members advocate for a pause, others favor further cuts. As a result, uncertainty looms over the December meeting, with markets watching closely for any shift in tone or policy.
In Europe, the outlook is improving. Growth in the third quarter was better than expected, especially in Germany, where business confidence is rising. This supports our view of a cyclical recovery in 2026. The European Central Bank kept rates unchanged, saying its current policy is appropriate. This likely marks the end of the rate-cutting cycle in Europe.
Turning to equities, artificial intelligence remains a key market driver, with big tech continuing to lead the charge.
The S&P 500 posted gains in October, but performance was uneven, concentrated in a handful of mega-cap names. Not all sectors are participating equally in the rally, underscoring the importance of selectivity. We maintain our focus on US technology, with overweight positions in semiconductors, software, and hardware.
Tech compagnies earnings are beating expectations and raising their revenue forecasts. We believe this trend will last as AI adoption grows through the coming years. Despite high valuations, we don’t see a bubble. These valuations are supported by strong and sustainable earnings growth, especially when looking at 3 to 5-year projections.
In fixed income, the environment remains volatile.
Despite the Fed’s rate cut in October, short-term yields moved higher, reflecting Powell’s hawkish comments. Liquidity is tightening, with short-term rates pushing above the Fed’s target range, adding pressure to funding markets.
To alleviate this, the Fed will end its balance sheet reduction program in December—a notable shift in its policy stance. Against this backdrop, we maintain an underweight position in sovereign bonds and continue to favor short durations, as yield curves will continue to steepen.
Gold remains a key safe-haven asset. After reaching a record $4,355 per ounce, it corrected to around $4,000, mainly due to profit-taking. Demand remains strong, especially from central banks and ETFs. We also trim profits but still hold gold as a core position as it’s especially valuable in volatile period and we remain confident about its medium-term fundamentals.
Turning to currencies, the US dollar has remained relatively stable in recent weeks, supported by resilient economic data and the Fed’s cautious tone ahead of the December meeting. However, we expect the dollar to weaken over time, as the Fed’s rate-cutting cycle is likely not over and structural de-dollarization risks persist.
Given this outlook, we maintain an underweight stance on the dollar, despite elevated hedging costs, particularly for Swiss franc portfolios.
Thank you for tuning in and we’ll see you next month.
