MACROECONOMIC OUTLOOK
At the start of 2026, geopolitical risk is back center stage reviving uncertainty but the macroeconomic scenario remains robust. With the Trade War, growth fundamentals have shifted increasingly focusing on domestic dynamics rather than exports.
- In the USA, 3Q25 growth has surprised to the upside (+4.3% quarterly variation at annual rate) and will continue to do so despite an expected Shutdown blip in 4Q25. Consumption is still holding strong (wages and strong household balance sheets), non-residential private investment as well (particularly driven by tech). Positive spillovers from the OBBBA are expected to amplify. Overall, the slight increase in unemployment is attributable to structural shifts (rising productivity enabling growth to continue despite a less rosy employment situation).
- In the Euro Area, growth has also surprised to the upside (+0.3% quarterly variation in 3Q25, equivalent to +1.2% at annual rate). Investment is leading the recovery, not least in AI, whereas consumption is lagging (high savings rate). Europe is also benefitting from its comparative advantages (aerospace and defense, tourism, not least in France).
- In Asia, an overall steady outlook is leaning on governmental plans : the stimulus package announced back in November in Japan and the precise measures accompanying the 15th five-year plan, to be announced in March in China.
Despite the developing events in Venezuela, we believe forecasts of a strong increase in global oil supply are premature. The investments needed are huge and the political situation still too fragile to enable careful planning. Our target for the Brent price is lowered to 60 USD/BBL as the geopolitical premium has now practically vanished. Any dramatic turn of events in Iran could lift prices back up towards 65 USD/BBL. Overall, our scenario on oil does not materially change the outlook.
In the next few weeks, some specific events will need to be monitored, not least: geopolitical developments; statistical catch-up in the USA; French 2026 budget; Supreme Court rulings on Lisa Cook’s position at the FED and the use of the IEEPA to introduce reciprocal tariffs; and J. Powell’s succession at the helm of the FED.
ASSET ALLOCATION
In January 2026, we are shifting our asset allocation so as to embody our view of a robust growth and steepening yield curves as a result of higher long-term yields (growth is leaning on domestic dynamics, driven by investment and fiscal stimulus).
- Our view on equities remains positive and we now see opportunities in all geographies (not least Europe and Japan, lifted to overweight from neutral).
o In Europe, a better than fared economic outlook should fuel the catch-up in equities. In Japan, the stimulus plan should continue to help benefitting sectors (industrials including nuclear energy, defense and tech) meanwhile a depreciated Yen will keep on boosting exporters.
o More broadly, our sector calls remain unchanged. Banks (excluding US regional banks with their exposure to subprime credit) will keep on benefitting from steep yield curves, volatility (trading revenues), a robust economy (low default rates) and the ongoing deregulation (especially in the USA). Geopolitical turmoil remains an aerospace and defense anchor. The technology investment theme is still a must but selectivity should prevail, especially in the USA. - We have downgraded our view on fixed-income to neutral (from overweight), given the strong yield curve steepening push and while corporate spreads remain tight. In fact, the main risk at stake is that of capital losses incurred by rising rates or
spreads, especially on higher maturities. This shift is accomplished through the downgrade of sovereigns both in Europe and the US to underweight from neutral and of IG corporates also in Europe and the US to neutral from overweight. Beyond, our investment hierarchy stays the same as we continue to favor IG over HY given spread levels. - We have upgraded our view on cash from underweight to neutral as we believe the path forward for monetary policy is clear and steady in Europe (deposit facility rate at 2%) enabling to lock in a steady return.
- Last but not least, with the return of geopolitical turmoil given the recent events in Venezuela and risks surrounding Iran, we are back to overweight on gold from neutral.
