Why European stock markets?
In this context, how to structure your portfolio? Eurizon carried out two upward revisions of its investment visionby increasing its rating on stocks (from neutral to positive) and that on the American currency (also from neutral to positive). Regarding the stock markets, the management company has relatively reduced the weight of Japan and increased that of Europe, which now competes for first place in the hierarchy of preferences in the United States, “where profit growth is more stable,” the report states.
The report then highlights another interesting aspect: “ In sectoral terms, we know that the rise in stock markets remains driven by technology: it should however be noted that the gap between tech and other sectors such as finance and discretionary consumption is modest and significantly lower than in 2023, a sign of a widening market ».
The American dollar in the crosshairs
Regarding valuations, the management house recalls at the same time that “ those of the stock markets appear tense, particularly in the United States, and that political uncertainty can be a source of temporary volatility ».
Concerning the dollar, Eurizon emphasizes instead that “ Trump’s victory pushed the greenback to 1.05 against the euro, pending further measures to revive the American economy and a tariff policy that could penalize Europe and other trading partners “. On the other hand, a dollar that is too strong would be a drag on the American economy, suggesting a more moderate position from the Trump administration ».
Obligations
Fixed income deserves a separate chapter, where Eurizon confirmed a neutral rating on the duration of Germany and the United States, while reiterating its interest in peripheral bonds of the euro zone. “Confidence in the continuation of the global cycle has driven down long-term bond yields in peripheral countries, thanks to a significant reduction in spreads compared to Germany.
At the same time, the management company expresses a positive outlook for the corporate bond markets, both for investment-grade and high-yield bonds in the United States and the Eurozone, forecasting “resolutely strong returns positive thanks to low underlying government interest rates and the sharp reduction in spreads.
Credit spreads, the document continues, “ are at their lowest level in previous cycles: 90 basis points for investment grade in the euro zone and 300 basis points for high yield, still in the euro zone “. From there, “ the potential for further spread declines is modest, but investment grade and high yield bonds remain attractive in the context of an ongoing economic cycle ».
