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After a strong performance in November driven by the re-election of Donald Trump, US equities remain one of our key convictions.

Emerging market (EM) corporate bonds have faced considerable challenges in recent years, with rising geopolitical tensions, defaults in China’s real estate sector, and elevated global interest rates dampening investor appetite; however, the tide may be turning. A shift in the global interest rate environment – marked by a rate cut by the US Federal Reserve and a fresh economic stimulus package in China – offers an opportunity to revisit this often-overlooked asset class.

The statements in late 2024 from China’s central bank and the country’s Politburo sparked hopes of a ‘whatever it takes’ moment, only to see these dashed, as policy actions have fallen short of expectations.

Trump's return to the White House marks the start of a new era that is set to boost US-based companies while the wider global investment landscape continues to contract. 

Infrastructure assets provide essential services to communities, facilitating the transport of people, data, and energy.

Several central banks, including the Federal Reserve, Bank of England, and European Central Bank, have ushered in a new era of rate-cutting, signalling the end to their fight against inflation. But what does this easing cycle mean for asset classes?

The global economy is becoming more fragmented, creating a complex landscape for investors and policymakers. Geopolitical events, such as the US elections, the Ukraine-Russia war, and heightened tensions in the Middle East, are amplifying market uncertainties. In response, we have raised our conviction on gold from 3/5 to 4/5.

Direct lending, the biggest segment in private debt, is now accessible to a broader range of investors and seeing increasing demand, boosted by its superior risk-adjusted returns and attractive features that include speed and certainty of execution.

Over the past 15 months, most asset classes have put in positive performances. However, we’ve entered a transitional phase marked by rising volatility, political risks, and market dissonance. To navigate this shifting landscape, we have reduced our global equity exposure and increased our conviction on hedge funds, as alternative investments are well-positioned to capitalise on current market uncertainties.

Earlier in August, global equity markets tumbled due to disappointing US macro data and the unwinding of the Yen carry trade. However, as we expect elevated market volatility until the US Presidential election in November, it may be premature to consider buying the dip.

The attempted assassination of Donald Trump, Joe Biden's withdrawal from the race, and the rise of Kamala Harris: unexpected twists have emerged in the US presidential election. 

Equity markets rallied during the first half of the year, driven by earnings growth, a macro backdrop that was more resilient than expected, and continued appetite for AI winners (the “Magnificent 7”). Looking ahead, we anticipate a broadening of equity markets’ leadership. Read more about our insights in the July edition of UBP’s House View.