Summary

1. Only a Sith deals in absolutes. We revisit our rating methodology and explain why we prefer to think in relatives
2. An economy at the mercy of a few – Like the stock market, the US economy has become dependent on the fate of the AI trade. This increases the risks for disappointments.
3. Proceed with caution. We see more things that could go wrong than right for the US market. Be it seasonality, positioning among systematic investors, valuations or the high expectations regarding the (easing?) path of the FED - the margin for errors seems to be razor thin. While there is no reason to sell now, investors should be aware that the ice is getting thinner. Diversification may help!
4. Ghostflation. Who is paying the tariffs? Early data suggests it´s not the exporters. We think that the majority of the costs wil be shared among companies and the consumer. As the consumer is weakening, margins might take the biggest hit
5. Three reason to like Europe: Despite the recent pause, the story of European outperformance is likely not over yet. Many structural headwinds are fading, and valuations remain attractive, especially when compared to the US market.
6. No change to our sector views: several key conviction calls are doing very well, such as Precious metal miners, European banks or Asian technology. We still like them. We also clarify our current stance on US technology (page 16).