The markets are very expensive

Based on a model of 1 to 10. Nevertheless, in which 10 is very expensive, the global valuation is 10, says Jan Viebig, CIO of the Oddo BHF group. Similarly,

The financial markets have not only rebounded their correction after the Day Liberation.. Consequently, They progress despite the accumulation of political uncertainty. Consequently, but in a very different way depending on the region and the sectors. Nevertheless, Jan Viebig. In addition, CIO of the Oddo BHF group, answers questions from Allnews:

What is the main teaching of the first half? Therefore, Does he relate to the role of politics?

Uncertainty is extreme at the moment. Therefore, If volatility (measured by the VIX) exceeded 50% in April in the United States. However, this is above all due to political reasons. In addition, It is impossible markets very expensive to underestimate political factors today. Furthermore, Politics influences markets in three main aspects. Therefore, The first focuses on the extremely erratic commercial policy of the United States. Furthermore, Customs duties have passed, with the Liberation Day, from 2.7 to 28%. Consequently, Today, estimates evaluate them at 16.6%.

The second factor concerns public finances. Similarly, American public debt is astronomical. Meanwhile, It represents 123% of GDP, a record since the Second War. Consequently, The “Big Beautiful Bill” increases it by $ 3200 billion to bring it to more than 145% of GDP. Nevertheless, This element cannot be ignored in an investment policy. However, This will necessarily result in an increase in long -term interest rates, through an increase in the risk premium. Furthermore, The penitification of the rate curve will increase because in parallel the Fed should lower short -term rates. Nevertheless,

The third impact is linked to a monetary markets very expensive policy that we consider very restrictive in the United States.

“We are thinking of gradually reducing our overlying in equity given the cost of prices”.

The scholarships are close to their highest. In addition, Is a 20% correction to be expected in the coming months?

It is perilous to provide such shocks since by nature they result from a surprise for the markets. However, we can observe that the markets are excessively indulgent in relation to risks. Moreover,

On the basis of a model of 1 to 10, in which 10 is very expensive, the global valuation is 10, therefore very expensive. However, The reason is due to the drop in interest rates that occurred almost without interruption since the 1980s. Therefore, According to the Nobel Prize Robert Shiller, a high valuation has two consequences. For example, In the long term. Similarly, over a period of 10 markets very expensive years, the expected yields of shares are lower than their long -term averages when the stock markets are valued at a high level. For example, The second consequence is that stock markets become more vulnerable to corrections when the valuations are very high. Furthermore, Investors must therefore expect long -term future yields to be 10% lower than the average yield observed since 1969 with a largely diverse global action portfolio. Moreover, and the latter should also expect an increase in volatility. If long -term interest rates increased, then we would become more cautious.

Why don’t the markets react to the latest negative information on customs duties announced for Japan, Korea and others?

Donald Trump often returns to his announcements, as shown in the acronym Taco created by financiers (Trump Always Chickens Out). The markets assume that Donald Trump will not implement the rates he announces. Since April 2, this markets very expensive hypothesis has worked. Today, customs duties are already high. They are 10% on all goods, to which are added 25% on steel, aluminum and motor vehicles. The market does not believe in an additional shock.

Will it also be worth for the Pharma, where we are talking about 200%prices. Should we sell the Pharma?

Pharmaceutical actions would naturally be heavily penalized if rates of 200% were to be implemented. But no one believes it. An interesting phenomenon occurred when Donald Trump raised the copper prices by 50% on Tuesday, July 8. In the United States, the course of copper flew away, while in London it did not react at all.

What is the main risk, that of an increase in inflation or a recession?

Both risks exist. Customs duties note consumer prices in the United States. The long -term inflation expected by consumers and measured by markets very expensive the Michigan index reached 4.2%. The increase in prices would also fall under inflation of 1.5 points.

Regarding the risk of recession. you should know that economists are generally quite competent to assess the probability of a recession. They consider today, on the basis of their models, that this probability has significantly increased. For us, this probability of recession reaches 30% for the next 12 months. A drop in GDP is therefore improbable, despite a greater probability.

How have you changed your asset allocation since the start of this year?

Since the beginning of the year, we have remained slightly overpacked in shares. During the April correction, we recommended to buy and not to sell the shares to stay overwhelmed.

We are investors who favor quality securities, with high equity return, competitive advantage and clear sales growth. On this basis. by taking up the approach of Warren markets very expensive Buffett, which asks to buy when the investors are afraid and to sell when they are euphoric, we have remained slightly over -the -hub.

Today. we are thinking of gradually reducing our overlying in equities given the high cost of courses and a too euphoric feeling.

“As Warren Buffett has just said it, the risk is not on the side of profits but currencies.”

Is Warren Buffett right to be under-noise?

The Warren Buffett portfolio is oriented over the next five years, given its size which prevents short -term adjustments. It is true that valuation is high on the basis of the main indicators. But, as Warren Buffett has just affirmed, the risk is not on the side of profits but of currencies. The extremely expensive dollar should depreciate, as the Trump administration would like.

In 1985. during a meeting of the leaders of the five main countries, markets very expensive at the Plaza Hotel in New York, they decided to lower the dollar, then very expensive. The greenback has actually dropped by 50% in two years. I don’t think it will drop so much. but the risk is such that the volatility of exchange rates is very high. This is the main risk of the moment.

How to adjust his wallet if the dollar had to drop massively?

American shares represent 71% of the MSCI Monde index. For European investors, this proportion is far too high. Under the lessons of Harry Markowitz, the investor must diversify his portfolio. We cannot devote 71% to a single country. Especially since the valuation of the American stock market is much higher than that of European titles. The investor should therefore refrain from placing his actions passively in the MSCI Monde index.

We also witness, in Germany, a profound change of markets very expensive political order. Since the Second War, Berlin has always taken care to present a more or less balanced budget. Germany has now decided to devote 500 billion to infrastructure. to no longer worry about the brake on debt and to allow the Länder to present an annual debt of 15 billion euros.

The markets hope that Germany comes out of its period of stagnation and grows significantly. Investments in infrastructure and defense will be considerable. The investor should support these changes and seize opportunities in these sectors.

What other sector seems attractive to you?

The investor will have to continue to invest in new technologies. Everyone talks about artificial intelligence, but doubt exists on their potential. However, a technological jump is occurring. After the recognition of texts, then of images, the AI seized chatbots (chatgpt). We are now entering a break. but rather in an incredible phase of markets very expensive new developments with AI agents, which is called general artificial intelligence. The machine will itself make decisions today made by humans. for example on driving or the complete organization of holidays abroad. Progress will be on an exponential basis.
Quantum IT is another area with promising prospects. There are still few investment opportunities, but they will not fail to accumulate for the next 3 years.

In the United States, to what extent will long-term interest rates increase?

The yield of treasury bills has been a little recently reduced. but it should go back to 5% in the medium term. Public debt exceeds understanding. Last year, the budget deficit reached $ 1800 billion, or 6.4% of GDP. It was correct to support activity during the COVVID. but there is no reason to extend this effort today and to penalize future generations. With the Big Beautiful Bill, we added 3200 billion markets very expensive debts for the next ten years. American debt exceeds all records. This will necessarily result in an increase in the risk premium.

The United States will pay more money this year for debt service than for military spending. It’s a fact. Households will be significantly affected.

Do capital are massively leaving the United States to take over the management of Europe?

German growth is almost zero this year. but the Dax index has won 20% because capital takes over the country and its large companies. In parallel. American investors who fear undergo the effects of the expected decline in the dollar diversify their investments towards Europe. No one knows the amounts precisely, but the effects are visible.

How will the beneficiary forecasts be adjusted?

As every year, analysts revise their expectations aside as the months go by. Exercise 2025 will be no exception. The increase in markets very expensive profits will again be stronger in the United States than in Europe. But we often forget an essential point. Capital profitability is 16% in the United States. In Germany, it reaches 9%. From the shareholders’ point of view. the added value of listed companies therefore remains lower than that of the United States.