Eben Louw

After years of relative underperformance, markets outside the US have outperformed handsomely in the year to date and look set to continue the trend. Potential slowing in US growth and stimulus support, and further weakening in the USD are driving factors.

Despite sticky inflation, the Fed’s focus will likely be on the labour market, with guidance on at least two more rate cuts for 2025. This could support equities, along with fading tariff concerns and strong expectations for productivity gains. However, risks remain from slowing earnings growth (from tariff-related costs and lower consumer demand) and relatively stretched valuation. In Europe and China, while growth looks uncertain, stimulus and relatively more attractive valuations can continue to drive performance.

Locally, performance has been very narrowly driven. Local-focused counters have been priced for very little growth, setting a low base for positive surprises. Reform progress and anchored inflation expectations could also be valuable boosts to sentiment.

We are remaining close to neutral on growth assets, albeit with a slightly more cautious tone. Given stretched index valuations and concentration, we prefer active management for both equity and fixed income in the current market, along with alternative assets.

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