Note: Any reference to portfolio positioning relates to our flagship discretionary portfolios. Clients with bespoke or advisory portfolios should consult their Client Advisor for their latest positioning.
What you need to know
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We’re buying gold as we think the US dollar is likely to weaken further. We’re funding this purchase by selling some short-dated UK gilts. Valuations for long-date gilts remain compelling, while shorter maturities already price in all the Bank of England (BoE) rate cuts we expect.
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We’re also buying low-volatility developed market equities funded by the sale of some US equities. This reduces our exposure to the US dollar and dampens possible volatility if uncertainty were to increase again.
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To further increase our global portfolio diversification, a key pillar of our strategy, we’re also using the proceeds from our US equity sale to buy some emerging market equities, which are attractively valued.
Daniele Antonucci
Daniele Antonucci
Daniele Antonucci is a managing director, co-head of investment and chief investment officer at Quintet Private Bank. Based in Luxembourg, he jointly chairs the investment committee, owning decision-making and performance outcomes. As head of research, Daniele oversees the investment strategy feeding into portfolios and the teams of specialists across asset classes and solutions, ranging from macro, fixed income and equities to funds, alternatives, and structured products and derivatives. He leads the network of chief strategists, communicating the house view on the economy and markets to financial advisors, clients and the media.
Prior to joining Quintet in 2020 as chief economist and macro strategist, Daniele served as chief euro area economist at Morgan Stanley in London. He completed the High Performance Leadership Programme at Saïd Business School, University of Oxford, holds a master’s degree in economics from Duke University and graduated from the Sapienza University of Rome. Featured in The Economist and Financial Times and often quoted in the generalist press, he’s a published author in finance and economics journals and investment magazines, a frequent speaker on CNBC and Bloomberg TV, and an ECB Shadow Council member.
Making sense of a multi-polar world
The global order is becoming more fragmented and regional, a key shift from US-centric geopolitics to a more multi-polar world. Trade uncertainty remains high and is causing market volatility, but there are also signs of pragmatism, which provides some relief to investors. Our base case remains one where economic growth and inflation slow. But, unless a full-blown ‘trade war’ materialises, the global economy should avoid a recession and a significant spike in prices.
Interest rate cycles are also diverging. The Bank of Japan is raising interest rates while the European Central Bank (ECB) and the BoE are cutting. Due to the US trade tariffs, the US Federal Reserve (Fed) is likely facing the toughest trade-off between the risks of fuelling inflation and negatively impacting growth.
We think downside risks to growth will eventually dominate if sweeping tariffs are put in place, prompting the US central bank to lower interest rates. However, the bar to cut rates will be higher for the Fed than the ECB and BoE, given more pronounced inflation risks. Moreover, a high level of government debt and a large budget deficit in the US could keep US Treasury yields more elevated.
Trade tariffs and fiscal stimulus: two key market drivers
The 90-day tariff rollback between the US and China and the temporary suspension of sweeping tariffs to the European Union have helped stabilise markets while attempts to strike trade deals continue. But this isn’t the end of the story. The pause in tariffs and some possible trade deals are obviously key developments. However, underlying trade tensions remain, as shown by the recent increase in US tariffs on steel and aluminium.
The stagflationary impulse that defined the past six months — slower growth with higher prices — has also not faded entirely. That said, US policy is now shifting from tariffs on the rest of the world to domestic deregulation and tax cuts.
The question is whether the positive impulse to growth from tax cuts and spending will offset the negative drag from market worries about the sheer size and trajectory of US government debt. Likely, both will be at the forefront of investors’ minds, and we want to position portfolios to capture the former and mitigate the latter.
On the other side of the Atlantic, Eurozone governments, led by Germany, are scaling up investment, particularly in defence. We think many Eurozone governments are likely to invest in infrastructure and sustainability, as well as stimulate the economy more broadly. This is why we have an overweight position in European equities — which also carries a higher weight in our long-term, strategic allocation relative to their weight in global markets, recognising the positive structural shifts in Europe — and investment grade bonds.
Adding portfolio diversification and risk mitigation
We continue to believe that the US dollar is overvalued and likely to weaken further. In the near term, foreign investors also seem to have a lower appetite to buy dollar-denominated assets. Therefore, a key change the Investment Committee and I are making with our mid-year outlook is increasing our gold exposure, as it should benefit from a weaker dollar. A more fragmented and multi-polar geopolitical system whereby emerging markets seek alternatives to the dollar could also provide extra support to gold prices.
We’re funding the purchase by selling European government bonds. Valuations for southern European sovereign bonds are expensive, given the markets are now pricing in the same number of ECB rate cuts we’re projecting. Furthermore, the increase in bond issuance needed to finance the fiscal plans of Germany and France could drive up long-term yields and lower prices.
To further reduce our dollar exposure, we’ve sold some US equities and reallocated to both emerging markets and low-volatility developed market equities. Emerging markets are attractively valued, enhance portfolio diversification and benefit from dollar weakness. Low-volatility equities tend to outperform in ‘down markets’, dampening portfolio volatility if uncertainty were to increase again as we approach the end of the 90-day tariff pause in early July.
Reducing exposure to the US dollar isn’t new to our strategy. We recently swapped more of our ‘regular’ US equities for a version that’s protected (‘hedged’) against shifts in the euro/dollar exchange rate. We also sold some of our broad US equities and long-dated US Treasuries as the size of the US fiscal and trade deficits represent a key vulnerability for global markets. This helped us trim our dollar exposure, too.
Risk management is a key pillar of our investment strategy. Together with the shift from US equities to other markets to increase diversification, we’re also slightly reducing the weight of our concentrated stock portfolio (predominantly US and a few European stocks). For the time being, we’re reallocating to the wider US and European equity markets. This can help mitigate risks, such as the impact of tariffs on specific sectors, while also enhancing resilience at a time of uncertainty.
A recalibration, not an overhaul
Despite reducing our exposure, we still own US equities. It’s a high-quality market that’s strongly exposed to long-term growth trends such as AI, cloud computing and medical innovation. We’ve diversified into equal-weight indices to reduce concentration in mega-cap tech. Plus, we’re keeping a US equity ‘insurance’ instrument that appreciates when US equities fall (where client knowledge and experience, and investor guidelines and regulations, permit).
One of the most significant changes we’ve recently made is our purchase of Japanese equities, which offer good diversification at attractive valuations. Japan’s inflation is rising after years of deflation, making the Bank of Japan the only major central bank currently hiking rates. That divergence supports the yen, which we see as undervalued. An appreciating yen is likely to boost returns when translated into euros. As we expect just a moderate appreciation, Japan’s exports aren’t likely to suffer.
In fixed income, we recently moved from underweight to neutral on high-yield bonds, deploying previously held cash. Fundamentals look sound, and this call is proving successful. We continue to underweight US investment-grade bonds, as fiscal concerns might negatively impact Treasuries.
Anchoring portfolios amidst uncertainty
Volatility hasn’t gone away. And it never really will. However, a well-constructed portfolio can absorb shocks in one part while benefiting from strength in another. That’s why we continue to combine growth assets with defensive ones: equities alongside sovereign bonds and high-yield credit alongside high-quality European corporate debt.
Some risks are receding; others are emerging. A more lasting trade agreement between the US and China, or fiscal acceleration in Europe, could support risk assets, which is why we remain overweight equities. But policy remains fluid. In a world where markets can shift on a headline, flexibility is essential, and our overweight is moderate.
In investing, waiting for perfect clarity (strong upside with low risk) means waiting forever. As world-famous investor Warren Buffett said in a recent letter to shareholders, you never reach final conclusions — just a point of action that you take. So, we stay vigilant and look for opportunities. This is an investment landscape that rewards preparation, not reaction.
If you have any questions about our latest market views or portfolios, please speak to your Client Advisor who will be happy to help.
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Information correct as of 10 June 2025.
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