Election fever and a world fairness rally have in 2024 mixed to “masks the inconvenient truths underlying our economic system” equivalent to fast debt accumulation, excessive actual rates of interest and ongoing geopolitical stress, Saxo’s world strategists have declared on this quarter’s Saxo Quarterly Outlook report.

As elections in key market international locations (equivalent to the US, European Union and India) dominate world discussions, Saxo’s strategists spotlight the occasions and indicators in Q2 2024 that traders and merchants ought to keep watch over. Additionally they discover whether or not this deal with elections is diverting consideration from the precise figures affecting world markets.

In his macro be aware, “It’s all about elections and protecting establishment”, Saxo Chief Funding Officer Steen Jakobsen emphasises that “election optimism and a rally in equities have up to now masked the inconvenient truths underlying our economic system, the place debt continues to develop quicker than GDP.”

The present wave of optimism within the inventory market, Jakobsen argues, hides a extra uncomfortable reality – the worldwide economic system is in a fragile state. Central banks across the globe are tightening the purse strings, which, when mixed with excessive actual rates of interest and the mountain of current debt, might spell bother for financial momentum.

Because of this, Saxo’s strategists argue traders ought to in Q2 2024 scale back their publicity to equities in favour of mounted revenue and commodities.

Saxo Head of Fastened Revenue Technique Althea Spinozzi argues in her mounted revenue be aware that the potential easing of central financial institution financial insurance policies presents a compelling purpose for traders to contemplate extending the length of their portfolios – though warning is suggested for very long-term investments on account of persistent inflation considerations.

In equities, Saxo Head of Fairness Technique Peter Garnry encourages a extra impartial strategy to US equities within the face of “speculative fever” in AI-related shares equivalent to Nvidia. He’s additionally obese European equities, notably within the European defence sector, and underweight Japanese equities on account of Yen foreign money threat.

Saxo Head of Commodity Technique Ole S. Hansen states the commodities market is exhibiting indicators of restoration following a year-long consolidation interval, buoyed by potential central financial institution price cuts, which can soften the US greenback and scale back funding prices.

Lastly, Saxo Head of FX Technique Charu Chanana argues expectations of a US Federal Reserve price reduce in June or July will create recent alternatives for FX merchants in Q2, particularly in exercise currencies such because the Aussie greenback and in rising market currencies.

As Q2 2024 unfolds, Saxo reiterates that it’s necessary to have a balanced and strategically diversified funding strategy. With a 12 months stuffed with main elections, it isn’t simply “about taking part in the markets, however quite recognising the narrative driving investor sentiment,” Jakobsen concluded.