Joe Biden’s weakness was a lucky stroke for Donald Trump, who has shown similar symptoms for years. It remains to be seen what effect Kamala Harris has on the polls. Trump and his chosen VP are both proponents of weakening the USD. Unexpected US inflation and an impediment on international trade have become part of US political risk. If Harris chooses an equally appealing VP candidate, she has at least the same chances as Biden a few weeks earlier. Polls will have to show her appeal soon. Meanwhile, she is a positive political risk.

EU chip producers have the US and China as major markets. Since the US market is larger and more predictable, they are expected to follow US-induced restrictions on sales to China, while retaining their part in US market. The new UK government talked itself into a corner with promises on taxes that preclude great changes on spending. It is counting on renewed growth. It is not clear how far the government wants to go on coming to terms with the EU.

With a wet autumn looming, bogging down heavy military equipment and both sides exhausted and under-supplied with ammunition, there is a rational case for a ceasefire in Ukraine. This would likely have a noted positive effect on equity.

Asset allocation

Net equity sentiment remains positive and rising in very close concert. It is too strong to call the EU an outlier, but its clearly scores above the others, at very close to 50, while in the US, Japan and the UK, it is still at around 35. Net bond sentiment remains quite stable, with Japan as outlier.

Country allocation

Japan stands out for a negative and stable outlook on bonds. An interest rate move is expected and fully priced in, but the Bank of Japan still has not moved beyond ending negative rates. Japan’s equity scores are in line with the others, which may be a vote of confidence that the economy will thrive on its external sector.

Elsewhere, net equity sentiment keeps approaching net bond sentiment, but is poised to surpass it only in the EU.

IPE Quest Expectations Indicator - Net sentiment equities, latest

IPE Quest Expectations Indicator - Net sentiment bonds, latest

IPE Quest Expectations Indicator - Key for expectations graphs

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Peter Kraneveld, international pensions adviser, PRIME bv

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