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US bank shares fell
The third-quarter earnings season in the US has picked up pace following the release of the latest figures from US banks. Based on preliminary expectations, the third quarter is likely to have closed with strong earnings growth for S&P 500 companies, led by the energy and technology sectors. The major US banks have still achieved solid growth on an annual basis, indicating that their operations remain strong, but the pace has clearly slowed in many cases, which has tended to result in negative share price reactions.
Commodities - Technical Analysis
Gold and silver continued their downward trend, bouncing off key levels. Until their downward trends are broken, they will not be able to produce a significant rise. The fall in oil prices reversed from the $87.5 level and began a slight upward movement. Natural gas remained in an uptrend; a significant rise could even occur if it breaks out upwards. The price of copper has become stuck in a wider range, so the oversold and overbought zones may offer more favourable trading opportunities. The falling prices of wheat and corn have reached key support levels; a buying reaction from these levels could present favourable long opportunities with limited risk.
In the short term, the negative impact of tariffs coupled with elevated valuation levels, have increased the risk of a mild correction. However, as the threat of recession is moderate, the fiscal and monetary policy are supportive, commercial bank lending is improving, we would maintain neutral equity exposure and look for buying opportunities during corrections.
Macro
US growth got slower, but less, than expected, and as fiscal policy remains loose and interest rates will be cut further, a drastic slowdown looks less likely. The eurozone economy will manage a soft landing in H2, and growth could reaccelerate by the end of 2026. In Europe, headline inflation is back on target, but in the US, inflation is diverging from the target, and tariffs will drive it further up. ECB’s rate cutting cycle has ended at the neutral level of 2%, in case of the Fed, the priced in rate trajectory looks to be overly optimistic. Hungarian GDP growth could reach 0.6% in 2025 and ~3% in 2026, thanks to a large fiscal stimulus, which may push the deficit above 5% next year. In 2026, inflation may return back to the target level, however risks are tilted to the upside. The market expects 75-100 bps rate cuts by the MNB, but we think 6.5% will be kept for longer. Till December, HUF long positions looks to be more attractive, however after the last rating action in December this could change due to election risks.
Equities
In the short term, the negative impact of tariffs coupled with elevated valuation levels, have increased the risk of a mild correction. However, as the threat of recession is moderate, the fiscal and monetary policy are supportive, commercial bank lending is improving, we would maintain neutral equity exposure and look for buying opportunities during corrections. Although the US market is the most expensive, profit dynamics are strong, so we do not expect a sustained downturn. Encouraging developments are emerging in Europe, but there are still obstacles to overcome, which prevents outperformance. The weakening of the dollar and the Fed's interest rate cut are tailwinds for EM, but they are no longer cheap, and profit momentum is deteriorating. Although CEE related risks are increasing, investors are still compensated by the depressed valuations.
Bonds
As there are no signs of recession in either America or Europe, we recommend choosing the short/medium end of the yield curve in developed countries due to high budget deficits, rising debt trajectories, and political pressure on the Fed. We do not consider corporate bonds attractive due to narrow bond spreads.
Commodities
We maintain an overall neutral view on commodities due to various uncertainties surrounding the global economic outlook from US labor market to Chinese growth prospects. Several markedly different outcomes are possible, hence some caution is warranted. We recommend selective exposure (e.g., gold, copper, uranium).
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