At Allianz Global Investors, one of the world’s leading asset managers, they foresee a soft landing in the United States, although they warn of two scenarios that could put it in danger: a new acceleration of inflation and a recession in the country. In a context in which they expect inflation to approach the objective set by the central banks (although underlying inflation remains high), they maintain positive outlook in the bond market, hand in hand with the planned interest rate cuts.
These are some of the conclusions explained by Stefan Hofrichter, Director of Global Economics and Strategy at Allianz Global Investors, in the presentation of macroeconomic and market perspectives for 2025. With the focus on the recently held US elections, the expert indicated that the outcome of these elections could have a lasting long-term impact on financial markets and points to the “populism” as a “long-term drag on the growth and behavior of financial markets“.
Following Trump’s return to the White House, Allianz GI believes that the risks to bond yields are to the upside in the short term. “Still, with trend nominal growth in the US of 4% and assuming a neutral long-term monetary policy, the long-term equilibrium yield of UST is around 4%. “The normalization of the yield curve is in an early phase.”
Given the slightly different growth dynamics in the euro zone compared to the US and ECB rates at reasonable prices, the firm expects that increase the yield spread of US bonds against Eurozone bonds.
In this sense, Hofrichter contributed that, after populist governments come to power, real GDP growth tends to be significantly lower in relation to a country’s own history, as well as to the long-term world average. The reasons, according to the expert, are that economies become less open, suffer from higher inflation, higher levels of debt and fewer rights of freedom. “However, the growth disadvantage usually does not begin until after about two years, because populists are slow to change economic policy and apply fiscal stimulus measures in the first years of the populists in power,” he develops.
Regarding its forecasts for variable income, from Allianz They prefer the values of growth and quality and we maintain the values of IT for the long term, and they believe that, as long as cyclical data does not point to a significant slowdown and inflation does not accelerate significantly again, The US equity market is likely to continue rising. “After the US elections, even a thaw is possible. However, long-term downside risks increase given the high valuations of US equities and high expectations for long-term earnings growth” .
“While IT stocks are not cheap, excluding some names in the Magnificent Seven, valuations are not excessive. We add to IT stocks in times of weakness rather than reducing them in times of strength and focus on stocks and subsectors at reasonable prices with good profit growth potential,” the expert explained.
“Growth stocks could benefit from rate cut expectations and a lower growth momentum. “Quality stocks are likely to hold up if volatility increases due to growth fears or political uncertainty,” he added.
#Allianz #opts #bonds #due #expectations #rate #cuts
