Julie Celton-Madeleine
Hello and welcome to this podcast by BNP Paribas Wealth Management. My name is Julie Celton-Madeleine. Today I am joined by Edmund Shing, Global Chief Investment Officer, to discuss his investment strategy for October 2025. Hello, Edmund. Hello, Edmond. Hello. September was a positive month for investors across most asset classes, helped by a cut in US interest rates. Global stocks gained over 2%. Precious metals rallied 11% in US dollars, and corporate credit also rose modestly. Pressure on the US Federal Reserve and a weaker labor market led the fed to cut rates. Edmund, what impacts do you see this having on financial markets?
Edmund Shing
Well, Julie, first of all, we should say this was largely expected. So to some extent, financial markets have already predicted that and built some of the expected future interest rate cuts into the financial markets today. That being said, I think there are three effects that we see. Firstly, we do expect the Federal Reserve to continue to cut rates through the rest of this year and into next year, and so that we believe will certainly continue to help us bond yields. And we've seen since May, the ten year benchmark US bond yield has fallen from 4.6% back in May to 4.1% today. To some extent helped by the Federal Reserve rate cuts, that's the first effect. Longer term interest rates have come down modestly. That should help the economy. Secondly, we also see weakness in the euro dollar exchange rate. So the US dollar continues to weaken against most major currencies, but in particular the euro. And so we have adjusted our forecast for the euro dollar exchange rate to $1.24 and 12 months. So we do expect the euro to continue to appreciate and the dollar to continue to depreciate over the next 12 months. And thirdly, because we see lower rates combined with the lower dollar. The third effect is on precious metals. And that typically is a following wind for gold and other precious metals. So even though precious metals have performed very well so far this year, as you've mentioned, we see them continuing to perform well with a gold target at $4,000 an ounce and a silver target at $50 an ounce.
Julie Celton-Madeleine
Let's now talk about the technology sector. You prefer technology exposure outside the US. Magnificent seven stocks. Tell us more.
Edmund Shing
Well, first of all, US retail investors and indeed investors outside of the US are hugely invested in the Magnificent Seven. The Magnificent Seven stocks represent a bigger part of the not only the US stock market, but a bigger wait in the world stock market than ever before. Even bigger than, for instance, in the year 2000 when we had the last technology bubble. Now, on top of that, we have valuations that are very high for the Magnificent Seven at 30 times earnings or higher, much higher for Tesla for instance. So valuations already quite stretched. And on top of that, I do have concerns that the current massive boom in investment into AI and into data centers, all things artificial intelligence, this race for dominance in AI will lead to subnormal returns over time to these companies. So I think they're investing a lot of money today. I'm not sure they're going to earn a lot of money from these massive investments. I think there will be winners and losers. And at the moment that seems to be the market's pricing. Everyone is a winner, which simply can't be the case. I prefer technology in China. Why? Because first of all, they're much cheaper. Secondly, they have made huge strides in artificial intelligence and large language models, but spending far less money than the American Magnificent Seven. And thirdly, Chinese technology in a broader sense, is dominant in a number of areas outside of artificial intelligence, for instance, humanoid robots, anything to the robotics. The Chinese are amongst the world's best. Uh, we can also think about, of course, electric vehicles. And then self-driving vehicles will be the next step. They are dominant in battery electric vehicles already today. And linked to that, the battery technology itself, uh, is far ahead of anything we have in the rest of the world. So even companies like Tesla end up having to buy batteries from China because they're simply the best. So I think in many areas, Chinese technology is actually far ahead of its global and American counterparts. And so for that reason, we would invest in Chinese tech even after the strong run. We would continue to invest in them.
Julie Celton-Madeleine
Today. Turning to other asset classes, you remain a big fan of adding commodities to a diversified investment portfolio. Why is that?
Edmund Shing
Well, because, Julie, we've observed over the last five years that the stock markets and bond markets have increasingly moved together. Now, for investors, that's fine as long as they both go up. Obviously, the problem comes when stocks go down normally or in times past. The idea to have would be to have both stocks and bonds in a diversified portfolio on the basis that when stocks correct go down, we'll go into a bear market, bond prices go up and therefore partly compensate and cushion the fall in stocks. However, over the last five years, that hasn't worked, particularly in 2022, we saw stock market. And bull markets fall by 15, 16, 18% at the same time, so there was no offset. Holding bonds did not cushion anything in terms of the fall in bond stocks. In fact, it just they went down together. What, however, did provide diversification. What did go up in 2022 when stocks and bond fell were commodities. This could be, as we've said, precious metals gold, silver, platinum, but also industrial metals, for instance, copper, tin, aluminium and other commodities such as energy related commodities as well, thinking of course of uranium, amongst others. Over the year to date they've performed well. But again, we come back to the point that when stocks and bonds fall together, commodities have have started to outperform. And in a world where we see growing demand for these commodities, but where supply remains restricted, we do expect commodities to continue to do what they've done up to now and perform well and continue to add performance, but in a non correlated way to stocks and bonds. So for that reason, for anyone holding stocks and bonds, we advise that they should be adding a pocket in commodities as well.
Julie Celton-Madeleine
Finally, can you share with us your top investment ideas for the next few months?
Edmund Shing
Yeah, I think there are four I would mention here. Julie. Firstly, European banks. I think eurozone stocks have done well this year, but the star performers have been eurozone banks. They have done very well, but they still offer a very good valuation, improving profitability, a high dividend yield at 5%. And I think as well what is interesting, we see increasing loan demand in Europe, which continues to help the top line of banks. So for many reasons we therefore continue to like eurozone banks. Secondly, I've mentioned Chinese technology stocks. So I would again reiterate Chinese technology stocks for all those reasons I've mentioned before performed well, but we think there's still a very good future in front of them. Thirdly, precious metals. We come back to gold, silver and platinum. But actually right now I would favour silver and platinum over gold even. But all three we continue to like and a positive one. And finally emerging markets ex China focusing on three countries in particular South Korea which is very heavy technologically. So again, a cheap market but very strong technologically, particularly in areas like robotics, like China, Brazil and Mexico. These two Latin American countries are both very cheap in PE terms, uh, have appreciating currencies against the dollar and finally have strong commodity exposures in a time when we like exposure to commodities. These two stock markets have a lot of commodity exposure within their regional stock markets.
Julie Celton-Madeleine
Thank you, Edmund, and thank you to our audience for following this podcast. Please like, share and subscribe to our weekly podcast and visit our website for our investment themes and research. See you soon!