Key points
 

• The US equity market experienced a significant correction, dropping 10% in just 22 days—the 6^th largest correction in 75 years. This reflects market doubts about the optimistic assumptions surrounding Donald Trump's second term, which has recently focused on disruptive policies. We now anticipate a slowdown in US economic activity in 2025, without giving into pessimism, as fears of recession seem exaggerated. We have revised our growth estimates from 2.3% to 1.9% and adjusted our inflation expectations from 2.7% to 2.9%. Despite this, we still foresee two Federal Reserve (Fed) rate cuts in 2025.
   
• Although our outlook on the US economy remains constructive, equity markets may remain volatile in the short- term in the absence of significant policy changes (from Trump or the Fed). In this uncertain environment, we have reduced our conviction on risky assets, shifting our position on US equities from a slight overweight to neutral. Concurrently, we are raising European equities from a slight underweight to neutral, while staying vigilant about potential tariff impacts. We maintain a positive bias towards emerging markets, particularly in Asia.
   
• We continue to approach duration with caution, keeping a slight underweight on US and European government bonds. Quality credit remains the most attractive segment in the bond markets. Additionally, we maintain a positive stance on the dollar, viewing it as a hedging asset in our portfolios, and continue to appreciate gold.

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