Summary

1. Healing FOBI - A flurry of reasons (concentration, valuations, tariffs, etc.) have built a wall of worries the market continues to climb. This makes us wonder if we and the market are infected with a rare form of phobia, the “Fear Of Buying In” (FOBI).

2. Don´t fight the Fed – The prospects of lower rates outside a recession is a strong force, especially since the market is already enjoying easy financial conditions. Seasonality is also supportive.

3. A low bar to clear - We just entered Q3 earnings season, and we think it can be a positive catalyst into a seasonally strong period for risk. The first published results - mainly US large banks, ASML and LVMH - were generally reassuring.

4. Europe: Selectivity is key - From a valuation perspective Europe remains attractive, especially in relative terms. However, due to a stronger Euro, we see the risk of earnings downgrades for some exporters. Slight preference for emerging markets.

5. Japan – Political drama and investment opportunities: Uncertainty has risen while “corporate reform” is advancing regardless of domestic politics. Cross-share holdings are being reduced, and share buybacks are on the rise.

6. We recognize that the environment now looks relatively more favourable for US Big Tech (at least the “Winners of AI”). We upgrade both the US Information Technology and Consumer Discretionary sectors from underweight to neutral. Selectivity is recommended.

7. In Europe, the Construction & Materials sector is downgraded from overweight to neutral after a great (out)performance the last three years.