Financial markets began the year amid heightened geopolitical tensions. While developments in Venezuela and renewed frictions in the Middle East generated volatility, they have not altered our strategic assessment. Economic growth remains sufficiently robust to sustain corporate earnings, particularly in the United States. We have therefore made no changes to our asset allocation.

 

Global equities advanced in January. The MSCI All Country World Index rose 2.5%, equivalent to +1.8% in EUR terms. US equities gained 1.5%, while the Eurozone advanced 2.8%, Japan 4.9%, and Emerging Markets nearly 9%. The breadth of returns across regions highlights the underlying resilience of equity markets despite geopolitical uncertainty.

 

Earnings remain the cornerstone of our positioning. The US reporting season has again delivered solid profit growth and a high proportion of positive surprises, with earnings expected to expand at a low double-digit pace this year. Leading indicators such as the ISM manufacturing index have returned to expansion territory, reinforcing the constructive growth outlook. Importantly, the recent market advance has been driven primarily by earnings rather than valuation expansion. Corporate profitability in the United States continues to exceed that of most other regions, supported by productivity gains and structural innovation strength. This combination underpins our overweight in US equities, while other regions remain at strategic weight.

 

The macroeconomic backdrop remains broadly supportive. Recent data indicate a gradual cooling in parts of the US labor market alongside moderating inflation pressures. In Europe, activity indicators have stabilized and inflation has eased further, with policymakers describing the policy stance as broadly balanced. Monetary policy is therefore likely to become incrementally more supportive over the course of the year. While the exact timing of further easing remains uncertain, the direction is constructive.

 

Fixed income markets were comparatively stable, albeit with regional divergences. Long-term Japanese government bond yields rose more noticeably amid fiscal concerns and curve steepening, while yields in the US and Europe fluctuated within narrower ranges. With credit spreads near historically tight levels and yields reflecting resilient growth expectations, bonds are better viewed as providers of income and portfolio stability rather than sources of capital appreciation. We therefore maintain a neutral allocation to fixed income, with an emphasis on quality and balanced duration.

 

Commodity markets strengthened during the month, supported by geopolitical developments and tighter supply dynamics. Precious metals exhibited elevated volatility. Despite short-term fluctuations, the structural drivers for gold - including geopolitical uncertainty, fiscal dynamics and sustained central bank demand - remain intact. We maintain a neutral allocation to commodities and continue to regard gold primarily as a strategic portfolio hedge.

 

Disciplined portfolio construction requires looking beyond short-term market movements and focusing on fundamentals. Economic growth remains intact, US earnings momentum is strong, and financial conditions remain broadly supportive. Accordingly, we maintain our current positioning: an overweight in US equities, neutral exposure across other equity regions, and a neutral stance in fixed income and commodities. Within our equity portfolio, we are sticking with our high-conviction calls in Information Technology and Financial Services. We believe this allocation remains well aligned with prevailing economic conditions and the balance of risk.

 

Please find attached our last Asset Allocation Update for February.