Executive summary
The global economy continues to grow solidly despite a barrage of headwinds. Extraordinary AI-driven earnings growth is powering markets to new heights despite stubborn inflation prompting global central banks to adopt hawkish stances. We maintain only a slight overweight in equities as valuations are elevated and the appeal of bonds has improved.
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Canada
The market was driven by commodity strength and Financials’ resilience. Canada's accelerated infrastructure agenda is creating opportunities in Energy and Industrials.
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United States
AI capital expenditure remains the primary driver despite growing scrutiny of hyperscaler return sustainability. Improving financial metrics, robust backlogs, and ample debt capacity suggest CapEx will sustain.
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Europe
European equities remain constructive despite Q2 underperformance from the Iran conflict and AI-led rally. Earnings momentum is impressive: EPS revisions have accelerated for 15 consecutive weeks. ECB rate hikes remain a potential risk.
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Asia
Asian equities delivered broadly positive but dispersed returns. Singapore benefited from growth and defensive-haven status. Taiwan capitalized on AI supply chain centrality.
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Emerging markets
Emerging markets have significantly outperformed, driven by AI value chain tailwinds. Unprecedented index concentration exists, with the top five stocks representing 35% of the benchmark.
Economy
The economic backdrop remains surprisingly resilient despite the energy shock, with economic data in both the U.S. and the G10 better than it was a year ago.
Fixed Income
In the context of our forecast for modest economic growth and cooling inflation, it is reasonable to expect steady global monetary easing over the remainder of 2024 and into 2025.
Equities
Following the strong gains of the past quarter, stocks are pricing in an optimistic scenario, assuming that the supportive macro backdrop and rapidly growing profits persist.