Market Musings 100525: Still A Bull Market, Or Just Dead Cat Bounce?

Sat 2:51pm by Edmund Shing

7 comments 660 reads

Market Musings 100525:
Still a bull market, or just dead cat bounce?

Video + Report this week:
INVESTMENT STRATEGY FOCUS MAY 2025 - Policy watching
(click title to go to video)

Summary

Translating soft data into hard: while US hard economic data are bound to worsen in the coming months given poor recent survey readings, financial markets will focus on policy direction and the potential for near-term trade deal announcements.
ECB continues to cut interest rates, easing euro financial conditions and supporting the economy. Two further cuts are expected in June and July to take the ECB deposit rate to 1.75%. The Fed should also cut twice this year, starting in Q3. Euro-based investors should move away from term deposits to higher-return asset classes.
US Treasury bond market is the biggest bully: the surge in the 10-year US Treasury yield from 4% to 4.5% in early April prompted a shift in President Trump’s policy direction, given the need for lower bond refinancing costs. We look for US 10-year yields to hit 4.0% in 3 months.
Expecting a weaker US dollar: weaker US growth, lower interest rates, and a rebalancing of capital flows back to Europe motivate our expectation for a weaker US dollar. Our new EUR/USD targets rise to USD 1.12 in 3 months and USD 1.15 in 12 months (per 1 euro).
Focus on Switzerland as a true safe haven: the Swiss franc and Swiss assets have performed strongly on the back of the surge in geopolitical risk. Our EUR/CHF 3- and 12-month targets are unchanged at 0.94 (value of one EUR), while Swiss stocks remain a good proxy for the European quality factor invested in Swiss francs.

Podcast:
INVESTMENT STRATEGY PODCAST - The 5% from 12-month highs system

(click title to go to video)

In this podcast, Edmund Shing, Global Chief Investment Officer, BNP Paribas Wealth Management, explains a simple investing system that investors can execute themselves on a monthly basis and which has very encouraging long-term results.

Are stocks hanging on to a bull market trend, or is it over?

Global stocks have been in a bull market since late 2022, judging by the advances seen in US and European stock market indices. Emerging market stocks have only more recently joined the bull market party, judging for instance…

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The Phoenix

Sat 4:00pm

Great stuff as always Edmund any thoughts on gold further to go or do you think getting close to peaking ?

Epitychia

Sat 6:07pm

Seems to be a balancing act. There is upward momentum with investors putting money into the market. On the other hand the market is rising at the same time as the economic prospects are getting worse.

At some point there will be a retracement. No one knows when. My guess is by the end of this month.

Also curious about gold (I hold). This does tend to sell off in an initial stock market fall but it then recovers after a month or two.

ChrisW

Sat 9:42pm

Edmund, thanks for that,

For European Small Caps try ESCT (European Small Companies Trust) .

Underperformed a European Etf (VEUA) 5 years, but over 1 and 3 has outperformed.

If this is just staring then should be a good ride, yep, i do have some!

Sat 9:49pm

Epitychia,

In the 1980s i worked with a brilliant lady who made the point that markets are financial, not economic, phenomenon.

If monetary conditions are loose or more important, loosening, financial assets will go up.

If economic conditions are worsening, companies won't invest, ill cut costs, and if interest rates fall, as in Europe, money moves from real assets (plant and equipment) to financial assets (bank savings etc).

You may be right, and i may be wrong, no one has a crystal ball. But history suggests that there is very little correlation between economic prospects and markets, but there is between monetary conditions and markets.

Whatever, best of luck!

Chris

Paul Walton

Sat 10:38pm

I haven't quite figured out how to beat inflation yet but I'm sure my ancestors will benefit! On deposit was beneficial until now, i guess I'll have to look elsewhere

Edmund Shing

Sun 6:28am

Hi yes in the short term gold is likely peaking, but ultimately I look for a lower US dollar long term which should help gold. Also I don't think central bank eg China are finished swapping from USD reserves into gold, which should support higher gold prices eventually. Edmund

Peter T

Sun 7:53am

I bought Xtrackers - MSCI EUROPE SMALL CAP UCITS ETF (LON:XXSC) after "Liberation Day" Be good to hear of other ideas in this area though from other Stocko members.

Market Musings 100525: Still a bull market, or just dead cat bounce?