The geopolitical environment remains highly volatile, shaped not only by evolving signals from the U.S. administration but also by the escalating conflict between Israel and Iran. With tensions rising across multiple fronts, how do we navigate this complex and shifting landscape?
Despite geopolitical headwinds, the global economic outlook has improved in recent weeks, supported by a trade truce between the US and China and ongoing negotiations with Europe.
Inflationary pressures from tariffs and slowing growth appear contained for now. Inflation softened again in May, and the pass-through effects of tariffs are materializing more slowly than expected. However, the intensifying Israel-Iran conflict adds a new layer of uncertainty, particularly amid the spike in oil prices.
Domestically, US business and consumer confidence indicators are showing early signs of recovery after a sharp post-Liberation Day decline. Hard economic data remain resilient, reinforcing our view that a recession is unlikely this year
Looking ahead, progress on trade agreements, fiscal stimulus—particularly the anticipated "Big Beautiful Bill"— and monetary policy easing should help restore confidence among consumers and businesses. This normalization in sentiment is expected to support risk assets, though geopolitical shocks remain a key risk to monitor.
How is this reflected in our asset allocation?
In the future, any market correction will give the opportunity to increase risky assets.
European small & mid-caps should benefit from their domestic bias with European fiscal easing and US “revenge tax”. Indeed, a section of the Big Beautiful Bill in the US propose to significatively increase the tax rates on non-US entities income connected with US trade or business. If this is implemented, this should support European compagnies whose business is domestically oriented.
Swiss dividend thematic will benefit strongly from negative yield on cash and bond in Swiss franc as we expect the SNB to lower its policy rate into negative territory considering the level of inflation and the Swiss franc appreciation.
We are once again overweighting the US technology sector, whose valuations have returned to more attractive levels and whose earnings season showed better-than-expected profits in the first quarter. Going forward, US technology will continue to lead the sector in research, particularly in the artificial intelligence segment, which should ensure higher-than-market earnings growth.
Finally, we remain exposed to corporate bonds and will take advantage of any new spike in credit spreads to increase our positioning.
