What’s happening on the markets? In our Investment View, the experts of our Investment Division regularly provide insights of current market events and their opinion on the various asset classes.
Note: Prognoses are not a reliable indicator of future performance. Please note that an investment in securities entails risks in addition to the opportunities described.
👉 What you read in this article
Macro outlook
In our view, the most likely scenario for the current year is still “no landing”. We believe that inflation in the developed markets will remain above the target of around two percent, while the economy will continue to grow. Yields on the bond markets are likely to trend sideways to higher. The US tariff policy should further increase the growth differences between the US and the rest of the world. We expect the US Federal Reserve to lower its key interest rate to 4% by the end of the year and the ECB to cut it to 1.75% by the end of 2025.
Scenarios
Scenario 1 (no landing/heterogeneous environment)
Trend towards growth in developed markets. The US tariff increases widen the gap between the USA and the rest. While growth in the US is forecast at 2.4% in 2025 in this scenario, it should be just 0.7% in the eurozone. The inflation trend would also be heterogeneous: USA 2.7%, Eurozone 2.2%. In this case, the Fed would cut its key interest rates only slightly to 4%, while the ECB would make stronger interest rate cuts to a level of 1.75%.
Probability in our view: 35%
Scenario 2 (soft landing/normalization)
Weaker growth below potential – growth in the eurozone remains low. Inflation falls towards the target value. The central banks respond with significant interest rate cuts.
Probability in our view: 25%
Scenario 3 (stagflation/trade war)
A potential trade war would increase inflation and reduce growth. Economic sentiment would deteriorate and global trade and production would be at risk of shrinking. On a geopolitical level, higher energy prices would have an impact. Both monetary and fiscal policy would be loosened.
Probability in our view: 25%
Scenario 4 (recession/restrictive policy)
Monetary and fiscal policy remain restrictive for too long, which would lead to a significant slowdown in the labor market and falling inflation. A trade war, stagnating productivity in the EU and potential deflation in China would be risk factors.
Probability in our view: 15%
Asset classes
Market performance in January was quite volatile. One of the key market themes in January was the inauguration of President Trump and the potential impact on policy, particularly in relation to the expected changes in tariffs and their impact on US and global markets. The 10-year yield in the US reached a 14-month high before falling amid signs of disinflation and a flight to relatively safe asset classes. One of the reasons for this was the Chinese start-up DeepSeek, which is challenging the US for leadership in the field of artificial intelligence.
Shares in AI-related companies such as NVIDIA saw some sharp price falls as investors digested the news that DeepSeek had trained its generative AI capabilities to achieve comparable results to the market leaders, but at a fraction of the cost. This calls into question the need for the heavy investment in advanced AI chips and data center capacity.
Note: The companies listed here have been selected as examples and do not constitute an investment recommendation.
The recent market volatility highlights the high level of uncertainty, which has led us to maintain our current allocation in February. We continue to favor a diversified approach with a slight underweight in equities and an overweight in high yield bonds and gold. This positioning provides a good balance between risk and reward and ensures resilience for the coming months.
Note: Portfolio positions of funds disclosed in this document are based on market developments at 21.2.2025. In the context of active management, the portfolio positions mentioned may change at any time. Please note that an investment in securities entails risks in addition to the opportunities described.
Equities
Our slightly defensive equity positioning is due to the ongoing risks, in particular the potential of an impending trade war.
We have made a strategic shift in our equity allocation from growth stocks to value stocks. In our view, the valuations of growth stocks are sometimes excessive, while value stocks remain attractively valued as their P/E ratios (price/earnings ratios) are at the long-term average. This offers the opportunity for significant upside potential as investors could increasingly shift to value stocks in a broadening market that rewards strong fundamentals beyond the mega-caps. In addition, rising interest rates are a headwind for growth stocks, particularly in the technology sector.
Against this backdrop, we have increased our positions in European and US value stocks while reducing our exposure to US growth and low volatility stocks. This move has also led to an overall increase in our exposure to European equities at the expense of the US region. The signs of a sustained economic recovery in Europe offer an attractive diversification opportunity,
Government bonds
In response to recent market developments and yield movements, we maintain a negative stance on government bonds. We continue to favor positions that benefit from a steeper yield curve as both short and long-term inflation expectations continue to rise globally.
In the US, neutral interest rate estimates are trending upwards and the risk of fewer rate cuts has increased due to strong economic growth and sustained inflation. There is even the possibility that the US Federal Reserve could move from a dovish stance to a neutral or tighter stance. This would mean a pause in interest rate cuts or even rate hikes again.
Against this backdrop, we prefer European bonds, as economic growth in parts of the eurozone remains weak, which increases the likelihood of further interest rate cuts. Furthermore, we maintain our positive view on emerging market local currency bonds. The devaluation of local currencies in emerging markets appears to be over, which supports this asset class.
Credit
High yield bonds remain an attractive market, supported by solid corporate fundamentals, low default rates and continued investor demand. While the potential for a further tightening of risk premiums appears limited, financing conditions remain favorable overall, particularly in selected regional markets.
We see European high-yield bonds as a good option, benefiting from the ECB’s supportive policy. Valuations remain attractive, which underlines our positive view of the region.
Asian high yield bonds offer diversification benefits, with China’s stimulus measures providing a tailwind. Their low correlation with other markets increases their resilience and makes them a valuable component of a balanced portfolio.
Given the general macroeconomic environment and attractive yield levels, we continue to lean towards riskier bond segments, while we are generally cautious on US high yield and investment grade bonds, where valuations and longer duration appear less favorable.
Money Market
Money market instruments remain an attractive option in the current environment as they offer a combination of liquidity, stability and competitive yields. With the yield curve showing signs of a slight steepening, short-term instruments continue to offer a solid return while mitigating duration risk. Their defensive nature makes them a valuable component of our broader investment strategy, providing flexibility in a volatile market environment.
Commodities
We are neutral on energy and industrial metals. OPEC’s production restrictions are providing some support, but the market remains well supplied and demand growth is sluggish. China’s stimulus measures have not yet provided any strong impetus and the stronger US dollar continues to weigh on industrial metals. Although geopolitical risks remain, they are not currently driving market sentiment.
We maintain our overweight stance on gold as higher inflation in the US and rising debt levels support gold’s long-term appeal. Despite a short-term setback after the US elections, the gold price has reached new highs, driven by strong technical momentum and continued buying by central banks and private investors.