Political events do not usually dominate stock markets for very long. However, a look at history shows that the US presidential cycle has a stronger influence on capital markets than is generally assumed. Knowing well that history never repeats itself exactly, we want to use this publication to place this year's US elections in historical perspective and make an estimate of the short to medium-term implications of the outcome of the election for US equity and interest rate markets. |
In this quarterly asset allocation update, we provide the typical Croatian EUR investor with an in-depth market analysis, explanations of the individual asset classes, and the optimal portfolios under various risk tolerance levels. |
Caution, adaptive stance, and data dependency remain the keywords for the monetary policy of ECB, the Fed and in the CE/SEE region. For CE central banks this means fewer cuts in Czechia, and Hungary in H2 vs H1, possibly even no cuts in Poland. For SEE this approach implies easing in small steps only, leaving the key rates at still elevated levels. |
As expected, the Fed decided to keep interest rates constant at 5.25-5.50% at its June meeting. Moreover, the median projection among council members has shifted to only one rate cut in 2024 (two cuts less than in March). Yet, as Chair Powell emphasized at the press conference, FOMC members are highly data dependent and welcome May's inflation data as a step in the right direction. The market responded by higher Treasury yields but this comes after the strong decline following CPI inflation data which were released just hours earlier. By both events - Fed meeting and May CPI data - we have gained confidence in our forecast of two Fed rate cuts this year. |
The ECB has delivered; next week, the focus will be on the US Fed's interest rate meeting. Expectations are also likely to be confirmed there — albeit in the sense that no interest rate cut is (yet) expected on the other side of the Atlantic. In the meantime, the stock markets are continuing their upward trend for the time being. In a sector comparison, IT stocks are still proving to be the driving force behind earnings and share price performances. Whether this continues in the short term will also depend on the US price data to be published next week. But what's the point of all this chatter? The European Football Championship kicks off on Friday and the Austrian focus on the north-western neighbour will no longer just be on the stock exchange in Frankfurt, but also on the stadiums in Düsseldorf, Berlin & Co. Olé! |