February has been quite a volatile month for financial markets, especially for equities. The information technology (IT) sector, in particular, has come under pressure. Investors are concerned about the high costs associated with AI capital expenditures and the competitive threat that large language models pose to software companies. Although we believe that the recent volatility was an overreaction, we see earnings momentum in other regions improving compared to the US. Additionally, a strong economic outlook and high earnings growth expectations in emerging markets make that region relatively attractive. Therefore, we are decreasing our position in US equities from overweight to neutral, while increasing emerging markets from neutral to overweight. We are also becoming slightly more positive on Europe despite remaining underweight on the region. Finally, we remain neutral on bonds and continue to hold a positive view on gold. Within our bond portfolio, we decided to increase our position in investment-grade corporate bonds.
- Macroeconomic: the outlook remains constructive
- Equities: emerging markets gain attractiveness
- Bonds: adding some credit risk
