The first half of the current year was marked by the gradual calming down of some of the risks that dominated the financial markets at the beginning of the year.
After a period of heightened uncertainty caused by geopolitical tensions and inflationary pressures, the global economy showed resilience, while capital markets continued to deliver positive returns.
Inflation is gradually weakening
Although economic growth remains uneven across regions, the development of artificial intelligence and the continuation of the investment cycle provide strong support for economic activity, corporate profits and stock markets. At the same time, inflation is gradually weakening thanks to lower energy prices, but still remains above the target levels of central banks.
The reduction of geopolitical risks and the resilience of the global economy justify an immediate increase in exposure to equity markets, while we still prefer a selective approach to bonds due to the risk of holding higher interest rates.
In accordance with the expectations of Erste analysts, the strategic investment positioning for the rest of the year implies a slightly negative attitude towards government bonds, a positive attitude towards corporate bonds of the European Union and local currency bonds in developing markets, while the attitude towards gold and commodities is neutral.
The global economy continues to grow around its potential, with strong support from AI-related investments and a gradual easing of inflationary pressures. This scenario, to which analysts assign an 85 percent probability, foresees a continuation of an environment of moderate growth and elevated but gradually declining inflation, with a still supportive monetary policy.
The main risks include uneven economic growth, disappointment in profit and productivity growth expectations, more aggressive interest rate hikes, and geopolitical escalation.
Although uncertainty remains an integral part of the investment environment, the basic scenario for the rest of the year still implies continued moderate global economic growth, a gradual reduction in inflation and a favorable environment for riskier assets.
