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Overweighting US equities has become a consensual choice that nobody can deny today. This position is however likely to change during the coming months.

The theme of resilience, i.e investing in companies able to withstand further disruptions to the global production chain and a firmer pursuit of sovereignty and security, now occupies a central place. 

In the bond markets, we are unwinding our overweight on emerging bonds pending the arrival of the Trump administration, and increasing our exposure to subordinated financial bonds and corporate hybrids.

In France Michel Barnier’s government fell, ushering in a fresh bout of uncertainty. The technical government option now seems to be the most likely scenario. However, peripheral eurozone countries are enjoying some momentum, which has offset the negative impact of French and German difficulties.

Economic indicators in the US are still buoyant but less so as the economy gradually returns to normal.

In China, the situation is improving but gradually, with the Caixin manufacturing PMI rising for the second month running.

Political tensions in France and also in Germany are inevitably weighing on PMIs.

Eurozone inflation has been slowing so the ECB can continue to reduce rates. 

Economic activity in the United States remains strong, while in Japan, inflation has resumed its upward trajectory.

The eurozone is still suffering from the conflict’s consequences and energy prices in particular are taking a toll as we enter winter.

The ECB is coming under increased pressure to ease its monetary policy and put a brake on the economic slowdown.

In Japan, the chances of the central bank tightening monetary policy are mixed.

As economic growth shows signs of overall resilience and interest rates begin to normalise, the High Yield market is now supported by a more favourable  environment.

Alexis Foret, Head of High Yield at Edmond de Rothschild Asset Management (France), believes that bonds in this segment – with their attractive yields and rising average coupons – have all the characteristics to cater to investors’ every need.

More than a victory, a triumph

Donald Trump and the Republicans have won full control of the White House and Congress. This scenario, which came with rather low odds in the opinion polls, has extended the “Trump trade” (bullish equity market and rising US long-term yields and dollar) and has this time around created a wider dichotomy between the United States and Europe (where equity indices and long-term yields are declining). Investors have focused on the Republican candidate’s promises of lower corporate taxes and deregulation in the US and rising tariffs for other trade partners – Europe included. 
They have also factored in deeper public deficits (rising real and nominal rates) and higher inflationary risks (rising inflation break-even rates). Markets have experienced violent swings since early October and the beginning of the “Trump trade”, with the S&P500 outperforming the Eurostoxx 50 by almost 9%.

The Republicans, under the leadership of D. Trump, have taken control of the House of Representatives.

Germany is preparing for political upheaval with a vote of confidence scheduled for December.

Markets have continued to rotate into exclusively US assets in another illustration of American exceptionalism.

With investors eyes focused on the US elections, the markets took a breather in October, posting 23 days without a daily change of more than 1%, the first time this has happened in three years. Once again, the polls underestimated the likelihood of Donald Trump's return to office; however, this was not the case for the financial markets, which correctly priced the result.

Edmond de Rothschild announces the appointment of Nathalie Cerutti as Director of Corporate Social Responsibility. Nathalie joined the group on November 1st 2024.

Edmond de Rothschild Corporate Finance has advised the shareholders of Redslim and Andera Acto on the sale of a majority stake to Astorg Mid-Cap, to support the Company’s growth and international expansion, collaborating closely with the Founders and the management team. 

• Donald Trump’s clear victory led to the yield curve steepening and the dollar rising
  
  
• China's economy offers a note of optimism
  
  
• The outlook in Europe has been weakened by the threat from the US to its exports and its reduced internal capacity to react.

US growth proved resilient in the third quarter, but US employment data remain contradictory.

The eurozone figures were a pleasant surprise with France expanding more than expected.

Japan's ruling party failed to get a majority in the weekend elections, reinforcing political uncertainty.