Navigating your investments after market turbulence
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Our Equity Top Pick List
We have updated our Equity Top Pick List to reflect the events of the past quarter. The list includes those stocks, typically US and European ones, that we consider to be proper investment choices from a fundamental point of view. It can provide a starting point for building a sector-diversified equity exposure in portfolios, but can also be used as a watch list. Technical analysis should be used to time / determine the specific investment decision.
Could the momentum return in the semiconductors?
The semiconductor sector has had a challenging quarter, with its performance in recent months lagging behind improvements in underlying fundamentals, even as AI-driven demand remained exceptionally strong. The accelerating adoption of AI by enterprises and the proliferation of AI agents are significantly increasing the demand for computing capacity, which points to a further surge in cloud services and data center investments. Given current supply constraints, record-high backlogs, and higher-than-expected investment needs, we expect further upward revisions to earnings forecasts in the semiconductor industry. Nevertheless, the sector’s valuation appears favorable from a historical perspective, which, in our view, could result in a more attractive risk-return profile in the coming months.
The outcome of trade negotiations remains uncertain, and although the worst outcome can be avoided, historically unprecedented high tariffs are still to be expected. Global growth is expected to slow, but many countries are still trying to offset this with high budget spending, which could lead to sticky inflation in different ways across regions.
Macro
In the US, expectations point to a wide base slowdown in economic growth this year and next, to around a below-potential 1.5% rate. The tariff war is taking it’s toll through rising uncertainty on investments and consumption. In the Eurozone tariff war could slow down YoY growth to around 0.5%. Full year growth could be just below 1%. The inflation outlook is on target in Europe and above target in the US, where it is also rising. Upside risks are present due to oil prices, geopolitics, tight labour markets and loose fiscal policies. The priced in USD rate trajectory is far from a done deal, for the two cuts this year, recession pressures should get stronger. In Europe, fiscal spending could drive yields further up. In Hungary we revised down our 2025 GDP growth forecast from 2% to 0.6%, inflation can be around 4.5%. In the summer, we expect pro-HUF forces could remain strong. The carry will be kept at high levels, and we do not expect any policy shift. Regarding the long end of the yield curve, we suggest a cautious approach.
Equities
Although tougher-than-expected tariff announcements in April caused a significant decline in global stock markets, it soon became clear that the pain threshold was not so far away, where US policymakers started to refine their approach. Stock markets recovered in a V-shaped way, and now again have above-average valuation, with supportive but weakening profit growth. The positioning is neutral, with upside and downside risks balancing each other. The US growth advantage over the rest of the world is diminishing, but fiscal policy has remained expansionary, so the risk of recession is low. Europe is cheaper, but the repricing may be hampered by US trade negotiations, stronger euro, lagging profit growth, and falling behind in the AI race. EM’s recent tailwinds may weaken, but CEE is still cheap enough to hold our overweighted recommendation.
Bonds
The growth-slowing effects of tariffs and the growth-stimulating loose fiscal policies may influence inflation risks and central bank policy options differently across regions. Due to significant politically driven uncertainties, it is worth maintaining neutral bond exposure, favoring short/medium maturities.
Commodities
The number of sectors that have performed well this year has clearly widened. However, economic uncertainties have not yet disappeared, so the commodity rally looks somewhat fragile and some caution may be warranted, selective exposure is recommended (e.g. we still favour gold, copper, uranium).
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