The global economic landscape is shifting rapidly. While the United States faces an economic slowdown, Europe’s fiscal expansion presents a compelling case for equity investors. Defensive and low-volatility investment strategies remain preferable, while growth stocks in sectors such as healthcare, defense, and consumer staples offer resilience in uncertain times. In foreign exchange and commodities, the euro is expected to strengthen, while a neutral stance on commodities prevails.
Meanwhile, Bitcoin is steadily establishing its role within institutional portfolios. NFG’s Glenn Coxon joins Swissquote’s Ipek Ozkardeskaya to discuss about the major macroeconomic trends and expectations for the Q2.
The world has changed dramatically in recent months. The Trump presidency began with an aggressive stance, significantly impacting global economic and financial conditions. Internationally, the US wants to implement protectionist trade policies, to increase tariffs and to shift its role in global security. Tariff policies boost inflation expectations, hammer growth forecasts but Trump insists that the short-term pain is necessary for long-term gain. His military plans, on the other hand, result in a historical shift in European debt and spending discipline.
Glenn Coxon from NFG Partner’s explains the US strategy under the new Trump administration in two phases:
Phase 1: Focus on mass deportations and tariffs.
Phase 2: Deregulation, tax cuts, and potential economic acceleration.
The first phase is negative for growth but the second phase should be supportive, he says.
Right now, the global economic cycle is now at an inflection point. The US has moved from a late-cycle economy into a significant slowdown. The near-term outlook remains challenging, with potential improvement by late this year or early next year, according to Glenn.
Europe, on the other hand, has shifted toward expansion through fiscal spending amid the US’ drastic decision to withdraw military support for its closest allies. Consequently, Germany and allies moving away from strict budget discipline, boosting growth expectations in Europe. Rotation to European equities is strong.
The demand-driven rally, particularly in capital goods & defense, should have a higher multiplier effect compared to services according to NFG’s Glenn Coxon.
And improved manufacturing activity could possibly be the beginning of a significant structural shift across the Eurozone economies. This is why the Stoxx 600 has outperformed the S&P500 in the Q1.
But the lack of significant deregulation or market-friendly reforms could weigh on the European equity appetite in Q2, says Glenn, who — by the way — had turned bullish for the Stoxx 600 at the end of last year. Presently, though, most of the optimism has already been priced in.
One of the major themes of Q1 was the pullback in US Big Tech stocks due to fears of excess supply in AI, tariff fears and Chinese competition. Earnings growth in major US tech firms is slowing significantly at a time growth expectations for the US economy are waning.
The trend could continue in the Q2. The European equities, defensive sectors, low volatility stocks may continue to outperform, while US TIPS and gold are in demand to hedge against geopolitical, trade and inflation risks.
Moving into the Q2, Glenn Coxon
– Favours Europe Euro Stoxx 600 over S&P 500,
– Prefers Low-Volatility Equities with 20% allocation to global equity portfolio
– Envisages further shift from Value to Growth, increasing focus on healthcare, defense, and consumer staples
– Avoids pro-cyclical stocks
– Expects a potential shift in small caps timing remains uncertain
Lower energy consumption and new architecture could disrupt the semiconductor landscape. But EM markets are given a neutral outlook due to slow growth and a strong USD.
