Investment chief at Allianz deems America in a "mood crisis": remarks made recently.
Hear the Latest on the US Stock Market Chaos 📈🌩️
America's financial landscape is undergoing a "feel-bad economy" phase, as economic figures fail to align with the cloudy outlook from American consumers and businesses, according to a bigwig at Allianz's investment branch.
Gregor Hirt, the multi-asset chief investment officer at Allianz Global Investors, explains the reasoning behind this. With uncertainty at an all-time high, businesses have been stocking up on inventory in anticipation of tariff implementation. But Hirt forewarns that while the world managed to dodge the trade war nightmare, the equilibrium still leads to taxes that'll stir up trouble for the global economy.
"Last year was the tranquil before the storm, this year though, it's the storm itself," Hirt shared with City AM.
Despite share prices holding steady in the US, Hirt questions the reality of the situation. He points out that American retail investors, after being repeatedly told to buy low during the last two decades, have been resilient in the stock market. This phenomenon has helped the S&P 500 bounce back to levels higher than before 'Liberation Day.'
"Does it really make sense, under these circumstances, that the US market is back to its pre-tariff levels?" Hirt ponders.
Currently, US valuations are still high, but potential earnings aren't faring as well. As retail investment flow begins to wane, Hirt expects another market correction in the US later this year.
Virginie Maisonneuve, equities chief investment officer at Allianz GI, chimes in on the topic. With an emphasis on the dominating influence of US stocks, she predicts American company stock market share will dip down to around 50% as their valuations are reconsidered.
The best performers in the last few months have been European and Chinese tech equities. Maisonneuve notes this as a shift away from the over-emphasis on American stocks.
Allianz has made adjustments to its portfolios, cutting its gold allocation significantly from 25% to 7%. With the risk of a full-blown trade war diminishing, they're no longer focusing on safe haven assets like gold.
The firm is still seeking opportunities in the bond market, as the yield curve continues to steepen, dislodging the US's once-reliable safe haven status. However, they see promising potential in the defense sector, as Europe moves toward reduced dependence on the US for military activities.
According to Maisonneuve, it'll take a minimum of two years for European governments to significantly ramp up their defense spending, but the markets will likely anticipate this change in advance. Some of the top-performing stocks on UK and European markets this year have been defense stocks like Rolls-Royce and Chemring. 🛰️💥
- Hirt suggests that the resilience of American retail investors in the stock market, despite the uncertain economic landscape, may not be indicative of a true market recovery, as US valuations remain high but potential earnings are not as strong.
- Maisonneuve forecasts a decline in the dominance of US stocks, predicting a decrease in American company stock market share to around 50% as their valuations are reconsidered.
- Allianz has shifted its investment strategy, moving away from safe haven assets like gold due to the decreasing risk of a full-blown trade war and instead seeking opportunities in the bond market and the defense sector, as Europe moves toward reduced dependence on the US for military activities.
