The reflationary scenario is losing momentum, as markets are now undoubtedly pricing-in most of its components. Furthermore, the implementation of the Trump administration’s programme and intervention by the Federal Reserve appear to be slowing down. The economy nonetheless appears to remain buoyant.
The markets are awaiting more concrete signs of the tax reform promises before extending their gains.
- We therefore reduced our financials weighting, adopting a neutral positioning, given that the US interest-rate yield curve is likely to steepen more slowly.
- We are maintaining our underweight position in sectors with reduced upside potential in this context, i.e. telecoms and utilities.
- We have a neutral weighting in the energy sector, as geopolitical tensions will probably prevent any significant downturn in the oil price, whereas upside is limited mainly by available output volume in the US. The driving season will soon begin, which justifies a neutral weighting in the sector.
- We have resumed a neutral positioning in the listed property sector, as the threat of a sharp rise in long-term rates seems to have abated for the foreseeable future. We also believe that the Fed is not significantly behind the curve.
- We believe that tech stocks harbour further upside, despite their recent performance.