The prudence of investors limits the risk of decrease

Amplification of the theme of diversification. Similarly, The always cautious positioning of investors limits short-term the risk of materialization of macro-financial risks. Furthermore,

The second part of the year begins on an S&P 500 index at the highest historic. Meanwhile, in the Surachat zone after the 25% rebound from the low point of April 8. For example, The recent trajectory has raised fears of excess convenience on the part of investors. Similarly, It is the discrepancy between the low level of implicit volatility (VIX). Moreover, the record level of uncertainty linked to the economic policy which feeds fears of complacency. Meanwhile, It is true that the market feeling indices have returned to an excess area of optimism. Similarly, and the multiple valuation (22x for the 12 -month FWD P/E of the S&P 500) are again prudence investors limits risk decrease very tense. For example, The concentration of the S&P 500 returned to its previous high points. Moreover, the first ten companies representing almost 40% of market capitalization. However. However, the positioning of investors is not excessive: neutral with very slightly overlapping, which still remains far enough from the peaks of February 2025, July 2024, or even at the end of 2021. Furthermore, There is therefore space for a continuation of the short -term increase, hence the formula: “The Pain Trade is up”. Meanwhile, This final phase is also supported by a very strong relaxation of monetary. For example, financial conditions and monetary relaxation anticipations on the part of the Fed, which benefit the less good quality segment of the equity markets and the debt of companies.

Obstacles will quickly return to discussions. Moreover, The narrative Goldilocks (economic resilience, inflation in withdrawal) will be tested fairly quickly. Therefore, The highest increase prudence investors limits risk decrease in customs duties for over 70 years has not yet weighed on growth. The job market is more fragile than it seems, and inflation could resume an upward trajectory. The financial markets seem to overestimate the capacity of the federal reserve to absorb the slowdown in economic activity. This confidence could be excessive in a context where inflationary pressures persist. where budget deficits exceed 7% of GDP in the United States, weakening the credibility of the monetary institution. In this context, a more accommodating orientation of monetary policy could accentuate the depreciation of the dollar. If a weakening of growth can exert down pressure on long rates. state obligations remain exposed to rising risks linked to inflation, the worsening of public deficits and a potential erosion of confidence in the Fed. It is therefore not certain that the late monetary relaxation of the Fed supports risky assets.

The strong prudence investors limits risk decrease increase in global stocks (+10.2% in USD) is widely explained by the drop in the dollar (-10.8%), which has created strong distortions.

The other obstacle is Bottom/Up. The expectations of growth in action per share are ambitious: +10% for 2025 and +14% for 2026. On July 15 marks the start of the season of the second quarter results for the S&P 500. and 73% of companies will have published their results by August 1. This raises the question of the way in which the potential impacts of customs duties could be reflected in the results this season. as well as the lowering risk of margins if companies are forced to absorb additional costs related to prices. At this stage, higher customs duties have not yet weighed significantly on expectations. In Europe. 85% of companies in the Stoxx 600 index will have published their results by August 11, and action analysts prudence investors limits risk decrease anticipate a low publication season. Action profits (BPA) for 2025 have been revised down 6% since the start of the second quarter. the values exposed to customs duties undergoing the most important revisions. The weakening of the dollar has also weighed on profits. As in the United States. compression of margins has explained most of the beneficiary revisions since the start of the year.

The first half of 2025 was characterized by a marked rebalancing of global economic and financial dynamics. This will continue, or even grow. The dollar has undergone its strongest depreciation for two decades. reflecting both a weakening of its international status and reoriented capital flows to areas with better real perspectives adjusted to risk. The notable outperformance of European actions – the most significant in relative terms since 2006 – highlights the return. of Europe to global arbitrations. The decline in nominal interest rates. combined with prudence investors limits risk decrease the announcement of a massive defense expenditure plan in Germany, has revived the risk of risk in the euro zone. The assessment of the euro to 1.18 dollars confirms this reallocation in favor of European assets, reinforced by less asymmetrical growth prospects. In emerging markets, the trajectory changed direction after several years of chronic sub-performance. The development of technologies linked to artificial intelligence. especially in Asia (Taiwan, South Korea, China), has repositioned EM actions as a strategic component of global portfolios. This movement was amplified by the solidity of several emerging currencies. which benefited from a growth differential, the structural weakening of the dollar, and a monetary relaxation cycle in advance compared to that of the Fed.

Recall that the performance of the shares was largely in trompe l’oeil this year. The strong increase in global stocks (+10.2% in USD) is widely explained by the drop in the dollar (-10.8%), prudence investors limits risk decrease which has created strong distortions. The MSCI World AC in Euro is down 2.4%. In addition, if the performance of the S&P 500 is+6.6% to July 8, ahead of High Yield (+4.7%) and the US Treasuries 7-10 years (+4.0%), the S & P500 displays a maximum loss of 21.3% over the period, against -6.3% for High Yield and -4.9% for US Govies. The adjusted performance of maximum losses reflects a very bad yield torque/risk for American actions. This justifies the maintenance of a subjugation on American actions in the second half.

In total. a high level of uncertainties will continue to prevail: tariff war, Fed, maintenance of cyclical dynamics, dispersion of the margin rates of companies, budgetary debates and debt ceiling. The cursor will move from economic resilience to the complacency of investors. The return to extreme values for the valuation. concentration of equity markets in the United States will prudence investors limits risk decrease increase the fragility of the financial markets, even if the still cautious positioning of investors limits the risk of a marked reversal.