The market is topping out, at least in the short term

The US economy is in good health and equity markets have continued to notch-up gains, albeit more modestly. However, incertitude prevails regarding Donald Trump’s policies.

In the absence of any further drivers, US equities harbour less short-term potential upside, after a highly satisfactory Q1 performance.

We are therefore maintaining our core tactical allocation strategy.

• We remain neutral on the financial sector, given that the US yield curve will now probably steepen more slowly.
• We are maintaining our underweight position in sectors with limited upside potential in this context, namely telecoms and utilities.
• We are neutral on the energy sector, as geopolitical tensions will probably prevent any sharp downturn in the oil price, whereas upside will also be limited by several factors, particularly the large number of oil wells ready to come on-line in the US. The driving season will soon begin, which also justifies our neutral sector positioning.
• We remain neutral in the listed real estate sector, given the absence of any sharp shifts in short-term rates. We also believe that the Fed is not significantly behind the curve.
• We believe that tech stocks harbour further upside, despite their recent performance, although the trend is now less bullish.