Election fever and a world fairness rally have in 2024 mixed to “masks the inconvenient truths underlying our financial system” similar to speedy debt accumulation, excessive actual rates of interest and ongoing geopolitical stress, Saxo’s international strategists have declared on this quarter’s Saxo Quarterly Outlook report.
As elections in key market nations (similar to the US, European Union and India) dominate international discussions, Saxo’s strategists spotlight the occasions and indicators in Q2 2024 that buyers and merchants ought to regulate. In addition they discover whether or not this give attention to elections is diverting consideration from the precise figures affecting international markets.
In his macro word, “It’s all about elections and conserving established order”, Saxo Chief Funding Officer Steen Jakobsen emphasises that “election optimism and a rally in equities have to date masked the inconvenient truths underlying our financial system, the place debt continues to develop quicker than GDP.”
The present wave of optimism within the inventory market, Jakobsen argues, hides a extra uncomfortable fact – the worldwide financial system is in a fragile state. Central banks across the globe are tightening the purse strings, which, when mixed with excessive actual rates of interest and the mountain of current debt, might spell hassle for financial momentum.
For that reason, Saxo’s strategists argue buyers ought to in Q2 2024 scale back their publicity to equities in favour of mounted revenue and commodities.
Saxo Head of Fastened Earnings Technique Althea Spinozzi argues in her mounted revenue word that the potential easing of central financial institution financial insurance policies presents a compelling purpose for buyers to think about extending the length of their portfolios – though warning is suggested for very long-term investments resulting from persistent inflation issues.
In equities, Saxo Head of Fairness Technique Peter Garnry encourages a extra impartial method to US equities within the face of “speculative fever” in AI-related shares similar to Nvidia. He’s additionally obese European equities, significantly within the European defence sector, and underweight Japanese equities resulting from Yen foreign money danger.
Saxo Head of Commodity Technique Ole S. Hansen states the commodities market is exhibiting indicators of restoration following a year-long consolidation interval, buoyed by potential central financial institution charge cuts, which can soften the US greenback and scale back funding prices.
Lastly, Saxo Head of FX Technique Charu Chanana argues expectations of a US Federal Reserve charge lower in June or July will create recent alternatives for FX merchants in Q2, particularly in exercise currencies such because the Aussie greenback and in rising market currencies.
As Q2 2024 unfolds, Saxo reiterates that it’s vital to have a balanced and strategically diversified funding method. With a yr filled with main elections, it isn’t simply “about enjoying the markets, however moderately recognising the narrative driving investor sentiment,” Jakobsen concluded.
