Please see key messages below and download the presentation that we will explain in our BBVA Investment Solutions for European Business Conference in Geneva.
- Expect increased volatility in the coming weeks as the 90-day ‘tariff ceasefire’ ends. From bolt-on agreements for key countries to sudden backtracking and higher impositions, anything is possible.
- Tax cuts and spending should boost US growth ensuring recession clouds stay away in the near term.
- China needs the US as much as the US needs China as it relies on the US as an irreplaceable market. The US imports nearly double (USD600bn) what China’s second largest trade partner, Japan, imports.
- Overweight US despite the prevailing uncertainties – buy the dips…more rational valuations, together with the ‘Trump put’ should further boost momentum.
- European stocks look fairly valued vs. the US in historical terms. Fiscal stimulus well reflected in current valuations.
- Markets have been overly complacent about a tariff resolution…there is a real risk of returning to a world with higher tariffs. Albeit low (30%), the risk of a recession risk still exists.
- Cost-cutting efforts by the US are not bearing any fruit. A higher deficit means further UST issuance with yield upside risk potentially hammering the appeal of equities.