Let’s start with the big picture. The U.S. economy is slowing, but not collapsing. Growth is moderating, inflation is under control —partly because foreign exporters are absorbing tariff costs—, and the Fed is under pressure to ease. It’s a fragile balance, but it’s holding, for now.
Exactly. The latest jobs report shows resilience, especially in the public sector, but private hiring is clearly losing steam. And with inflation staying contained the Fed has room to manoeuvre. That’s why markets are already pricing in a rate cut in September.
In the US, the fiscal picture is worrying. The U.S. debt ceiling was raised again by 5 trillion, and we’re looking at an additional $3.4 trillion in debt by 2034. Yet, markets are rallying.
And let’s not forget the dollar. Despite resilient U.S. data, the greenback is under pressure. Structural concerns about U.S. debt, political interference in monetary policy, and increased hedging by foreign investors are all weighing on it.
On equity markets, the S&P 500 hit record highs in June. Investors are betting on the reflation, not the recession scenario. The budget deal, the delay in tariff hikes, and the prospect of monetary easing are all feeding into that optimism.
But it’s not without risks, especially with valuations already tight. Tech stocks have finally caught up, and there’s a fair amount of optimism around Q2 earnings. If companies manage to absorb the cost of tariffs without too much margin erosion, the rally could continue. But if earnings disappoint, especially in more cyclical sectors, we could see a correction.
That’s why we’re staying invested, but more selectively. We’re overweight U.S. tech, especially software and semiconductors, and financials. In Europe, we like industrials, particularly aerospace, defense, and utilities. These sectors offer both structural growth and some protection in a volatile environment.
Indeed, Europe might surprise on the upside. Germany’s stimulus plan—focused on infrastructure, energy transition, and defense—could lift German growth above 1.5% in 2026. That’s a key support for the regional recovery.
Yes, we continue to favour small and mid caps in Europe that offer strong growth potential and low valuations. In Switzerland, we also favour dividend strategies that have historically been effective in environments characterised by low interest rates and market volatility. They offer a combination of income generation and potential capital appreciation.
Exactly, the SNB cut its policy rate to 0% and reintroduced a -0.25% rate on excess reserves. That’s a signal they’re trying to stimulate lending, but they’re cautious about going too far. Given the low yield environment, we’ve have also reduced our Swiss bond exposure and shifted toward real estate and alternatives, which offer better return potential.
We have also reduced dollar exposure in CHF portfolios accordingly. So, to wrap it up: the outlook is constructive, but fragile. We’re not chasing the rally but navigating it with a selective approach.
