Given that the main risk for equities stems from the impact that rising oil prices and tighter financial conditions may have on earnings, and that the main risk for bonds lies in inflation, we prefer to avoid excessive directional bets by maintaining a neutral exposure to both equities and bonds.
At the sector level, we still recommend being as diversified as possible. It is preferable to focus on stagflation hedges (such as precious metals, renewable energy, infrastructure, real estate, or short-term inflation-linked bonds) and on sectors able to set prices thanks to inelastic demand, such as healthcare and technology.
As bonds investors are growing uneasy about the potential cost of the Iran war, sending long-term government bonds yields higher amid concerns over how the conflict will add to pressures on inflation, budget deficits and a potential hawkish response from central banks, we remain underweight on sovereign bonds.
The tensions observed in the private credit market, along with the disruptions triggered by artificial intelligence in the software sector, have also led to higher corporate bond yields (from 4.1% to 4.6% on average). Although financing conditions are tightening, it should be noted that they remain well below crisis levels (6.6% during the 2008–2009 financial crisis). Offering an attractive yield pickup over investment-grade credit and lower interest rate-sensitivity, high‑yield and emerging market debt remain favored.
Finally, commodities are beating stocks and bonds in the most impressive way since the 2022 invasion of Ukraine! This is not surprising after history’s biggest ever shock to oil supply! Despite recent profit‑taking in gold, linked to a stronger US dollar and potentially less accommodative central banks, demand for gold remains robust. Gold funds have seen $6.2 billion inflows year‑to‑date. A prolonged war in Iran and rising stagflation fears could allow gold to reassert its safe‑haven role.
Investing carry risks. Your capital and returns are not guaranteed. You may lose all or part of your invested amount. To find out more about investment risk, click here.
This publication is a document prepared for information purposes only and distributed by ING Belgium. It does not contain any investment recommendation within the meaning of the market abuse regulation nor any personalized recommendation within the meaning of MiFID. Its content is based on information sources judged to be reliable.
No guarantee, warranty or representation –express or implied –is given by ING Belgium as to the accuracy or completeness of the information presented in the presentation. There is also not any obligation of result whatsoever in respect of the information expressed.
The information presented is subject to change without notice.
ING Belgium NV/SA – Bank/Lender – Marnixlaan/Avenue Marnix 24, B-1000 Brussels – RLP Brussels – VAT: BE 0403.200.393 - BIC: BBRUBEBB – IBAN: BE45 3109 1560 2789 – www.ing.be – Contact us via ing.be/contact – Insurance broker, registered with the FSMA under the number 0403.200.393 - Publisher responsible: Sali Salieski - Marnixlaan/Avenue Marnix 24, B-1000 Brussels
"}}]}}}