Germany & EU increase spending
Defense and infrastructure spending will lift German and European growth, while the Southern periphery and CEE countries are already in a solid position.
- Germany and the EU’s proposals to ramp up infrastructure and defense spending will provide a much-needed boost to both short- and long-term growth in Europe
- German GDP growth could increase by an additional 0.2-0.6% compared to current forecasts
- Improved confidence and sentiment are expected to impact both the euro and bond yields
- With a potential ceasefire and the prospect of an end to the war in Ukraine, Europe could experience an additional boost
- Risks: Inflation may remain above target, while crowding-out effects and a tight labor market could limit growth
Corrections in the S&P 500
Market corrections are a normal and physiological phenomenon. They can be compared to natural cycles of valuation distribution and rebalancing. A correction is defined as a movement in which a stock index declines by more than 10% from its recent highs. The world’s leading stock market index, the S&P 500, is currently experiencing one.
What does history tell us?
- On average, the S&P 500 experiences a 10% correction or more every 1-2 years
- Corrections do not necessarily indicate the start of a bear market (a decline of more than 20%)
- On average, the index recovers within three months, though the recovery timeframe can vary significantly
New Record Highs for Gold
Gold rose to a record high above $3,028 an ounce due to Middle East tensions and concerns about the US economy slowing down
- The metal is up 15% so far this year, extending its strong annual advance in 2024
- Central banks continue to play a pivotal role in global gold demand, with their purchasing patterns influenced by both economic and geopolitical shifts
The Fed’s dilemma – Inflation vs. Growth
Wednesday evening Powell will have the difficult task of assuring investors that the economy remains solid while also conveying that policymakers are ready to intervene if necessary
- Fed is expected to keep rates on hold at 4.50%, with markets pricing between 2 and 3 cuts for the remainder of 2025
- Investors believe that officials need to see concrete evidence that inflation is moving sustainably towards 2% before acting
- New economic projections will be released and could offer insights on how officials anticipate Trump’s policies will affect the economy
- Policymakers are likely to revise growth forecasts for 2025 slightly downward, while marginally raising the outlook for core inflation
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The analyses and forecasts contained in this publication are based on assumptions, estimates and hypothetical models which may prove to be incorrect and therefore lead to substantially different results.