Last week: US economy remains resilient (PMI and Job data) - ECB cut rates by -25bps - Oil price surged by +6%
WEEKLY TRENDS
WEEKLY TRENDS
- Despite the Elon Musk-Trump criticisms and clash last week (bringing Tesla’s stock price down by -15%), the US May job report released last Friday was certainly the most awaited news, showing the US job market remained resilient with +139k jobs created in May, validating the FED’s ‘wait and see’ approach so far and confirming the US economy continues to head towards a soft landing. US stocks rallied on this optimism, especially the Mid Caps (Russell +3%)
- The ECB cut its rates by 25bps as expected, with many ECB members declaring afterwards that the interest rate reductions are nearly done
- Important feature, the US Treasury supported the US Bond market in buying $10bn of its debt last Tuesday
- The FedWatch tool still predicts 2 FED rate cuts this year, in Sep and in Dec (both by -25bps)
- Note that Silver is finally catching up on Gold, with a +20% YTD increase and a +9% WoW rise
MARKETS
Equities
Q1 corporate earnings released (WoW stock performances):
Broadcom (+1%), MongoDB (+17%), DocuSign (-15%)
NB weekly performances:
Eutelstat (-24%), Tesla (-15%)
CoreWeave (Cloud) +25%; Camurus (Swedish Lab) +25%
Analysts:
Amundi (GS ‘buy’ target €83), BAE sys (GD ‘o/w’ target £21), Euronext (MS ‘o/w’ target €172)
Rates
US curve (2-10 years) steepening stable at 47bps (Bond yields higher across the board)
HY corporate spreads slightly lower at 320-305 bps (US/EU)
Commodities
Oil price higher (+6%) among promising US China trade talks as tariffs deadline for some China made products are pushed to 31st August
Silver price higher (+9%) highest level in 13 years, mostly due to India
US
May ISM Manufacturing at 48.5 vs 48.7 prior and May ISM Services at 49.9 vs 51.6 prior
May PMI Manufacturing at 52 vs 50.2 prior (inventory build-up ahead of tariffs) and May PMI Services at 53.7 vs 52.3 prior
May NFP at +139k vs +147k prior (revised from +177k)
Under the watch
US Bond market remains under pressure hence the US Treasury support
Nota Bene
US Q2 GDP growth expected at +4.6% (Atlanta Fed’s data)
Wall Street analysts now see another 10% rally for the S&P500 in 2025 (year end predictions: DB at 6550; Wells Fargo at 7000; MS at 6500; GS at 6100; Citi at 5800; BofA 5500; JPM at 5200 and UBS at 6400)
CALENDAR
Macro Data releases:
US May CPI (11 June) expected at 2.5%; May PPI (12 June) exp. at 2.6%
Q1 corporate earnings:
US Oracle (11 June); Adobe (12 June)
EU : Inditex (11 June)
WHAT ANALYSTS SAY
Goldman Sachs Asset Management, 6 June 2025
Authors: John Flood, Head of Americas equities sales trading; David Kostin, Chief US equity strategist
US tech giants could outperform once again
The US tech giants are set for a comeback, predicts John Flood, head of Americas Equities Sales Trading in Goldman Sachs Global Banking & Markets. After leading the market higher in 2023 and 2024, the Magnificent 7 have underperformed year-to-date. “Investors continue to ask whether these stocks are overvalued,”. “You even hear the word ‘bubble' get thrown around.” But Flood sees it differently. He notes that the Magnificent 7 companies just reported “outstanding” earnings — beating estimates by a whopping 13%.
“With rising earnings and falling stock prices, valuations are now becoming much more reasonable,”. These stocks could perform well given the economic backdrop. “They are less reliant on economic growth, which means they can become defensive during uncertain times,”. Finally, what traders call “seasonals” could also be on the Magnificent 7's side. “July is typically a powerful month for corporate buybacks, which should be an additional source of demand for these names,”. “Put it all together, and I'm looking for the Magnificent 7 to outperform the broader market this summer.”
Will rising interest rates derail US stocks ?
As the risk of sustained high tariffs on imports to the US receded in recent weeks, investors have turned their attention to another potential area of concern for the US stock market : rising interest rates. The nominal yield on 10-year US Treasury bonds rose by 40 basis points in May to 4.4%. That's up from about 3.6% in mid-September. Several factors, including a declining risk of recession, concerns about the path of US government debt, and higher borrowing costs around the world, may have contributed to the increase.
Importantly, stocks' vulnerability to rising interest rates depends more on the reasons yields are increasing than the absolute level of rates, David Kostin, Goldman Sachs Research's chief US equity strategist, writes in the team's report.
Equities usually appreciate alongside rising bond yields when the market is raising its expectations for economic growth. But stocks struggle when yields rise due to other drivers, like fiscal concerns. The team estimates that S&P 500 returns over the next 12 months will be around 9%, bringing the index to 6500.
At the same time, bond yields remaining at their current level could constrain the future valuations of stocks. Goldman Sachs Research's macro model suggests that a 100-basis-point change in real Treasury yields is associated with a roughly 7% change in S&P 500 forward price-to-earnings (P/E) multiple.
The team's model indicates that the S&P 500 currently trades close to fair value due to strong corporate fundamentals, especially among the largest stocks, and their baseline forecast assumes the P/E multiple will be roughly unchanged in 12 months.
“We expect continued economic growth and a Federal Reserve on hold will keep yields elevated, sustaining investor preference for companies with strong balance sheets that are insulated from the pressure of interest rates,” Kostin writes.
ODDO BHF, 3 June 2025
Author : Arthur Jurus, Head of Investment Office PWM
A dividend strategy involves selecting companies that pay dividends above the market average. The objective is not simply to generate income, but to build a source of performance that balances regular dividend flows with long-term upside potential.
In Switzerland, high-dividend stocks are mainly found in finance, industry and healthcare. Zurich Insurance (4.9%) and Swiss Life (4.3%) dominate the financial sector. In industry, yields are more moderate: Sulzer (2.8%), Acceleron (2.6%), SFS (2.1%), VAT (2.0%) and ABB (1.9%). Novartis offers 3.8% in healthcare. Nestlé offers 3.5% in consumer staples, Swiss Prime Site 3.0% in real estate, and Givaudan (1.7%) and Sika (1.6%) round out the materials sector. The best yields remain concentrated in defensive and insurance sectors.
Contrary to popular belief, a dividend-focused strategy does not sacrifice performance. According to MSCI data, the annualised performance of the MSCI World High Dividend Yield index has been very close to that of the MSCI World index over the past 26 years. The main difference lies in the contribution of income: in a dividend strategy, regular payments represent a larger share of total performance, reducing dependence on price movements alone.
But not all high-dividend companies are created equal. Some may have high yields simply because their share prices have fallen – often a symptom of deteriorating prospects. A serious strategy therefore focuses on companies that offer both attractive yields and a proven ability to maintain or even increase their dividends over time. It is these criteria of stability and quality that differentiate opportunistic approaches from sustainable strategies.
Dividend portfolios also have interesting sectoral and geographical characteristics. Whereas the MSCI World Index is now largely dominated by US technology giants, a dividend strategy overweight European sectors with strong cash generation: finance, industry and consumer staples. This structural diversification strengthens the portfolio's resilience by reducing its dependence on a few US mega-caps.
Furthermore, dividend-paying stocks become particularly attractive in an environment of low or falling interest rates. Today, the ECB's key interest rate stands at 2.25% and is expected to be lowered soon. Short-term sovereign bonds, such as 2-year German Bunds, offer yields of less than 2%. In this context, an annualised dividend of 3% is not only competitive, but also offers upside potential that is lacking in traditional bond assets.
Dividend-paying equities thus offer a double advantage: regular income (ideal for investors seeking yield in an uncertain environment) and participation in companies' growth potential, provided they are carefully selected. Companies that maintain or regularly increase their dividends tend to outperform in the long term, as they demonstrate financial discipline, robust cash flow and high-quality governance.
RAIFFEISEN, 3 June 2025
Author : Geoffroy Brochard, Investment Advisor
In the wake of the protectionist measures decided by Mr. Trump's administration since his second term, no sector of activity has been spared. Just recently, Mr. Trump announced the introduction on 4 June of a surcharge of 25 to 50% on imported steel and aluminium to protect his country's steel industry. The pharmaceutical sector is no exception. On 12 May, the US president issued an executive order entitled ‘Ensuring American Patients Have the Most Favoured Nation Drug Prices’. By issuing this executive order, the US president intends to force pharmaceutical companies to massively lower their prices in the United States. This means that in future, the price of a drug in the United States cannot be higher than the lowest price offered in another industrialised country.
Pharmaceutical companies immediately sounded the alarm, as the US pharmaceutical market is not only the largest, but also the most profitable. Resistance is also likely to arise. Such a radical change would require a change in the law and therefore the approval of Congress. And there, the powerful pharmaceutical lobby is likely to have its say.
The reasoning is clear: if drug prices were to fall dramatically, pharmaceutical companies' profits would decline, resulting in less funding for research.
Few MPs will want to take responsibility for this. Roche, for example, has already announced that if the most-favoured-nation clause is introduced, its investment plans in the United States will be reassessed. As a reminder, on 22 April, the Basel-based group announced an investment of $50 billion in the country over the next five years.
Due to the great importance of the pharmaceutical sector, Switzerland would be severely affected by this decree. Indeed, this sector is not only one of the main pillars of the Swiss economy, it is also well represented in Swiss indices with Novartis and Roche. The combined weight of the two multinational pharmaceutical companies in the Swiss Market Index (SMI) is over 28%. And of Switzerland's total exports of CHF 377.8 billion in 2023, CHF 135.5 billion, or 35.9%, is attributable to chemical and pharmaceutical products.
Despite the planned introduction of the most-favoured-nation clause, the longer-term outlook for the healthcare sector remains intact. This year, Roche and Novartis shares have performed in line with the broader market. There are two reasons for this:
· firstly, pharmaceutical companies' shares are currently attractively valued and many negative factors have already been priced in
· Secondly, demographic changes and an ageing population will keep demand for medicines high. Added to this are attractive dividend yields of around 4%. Finally, Novartis and Roche remain key pillars of a well-diversified portfolio. Taking into account not only their share price performance but also dividends and various spin-offs (Givaudan, Syngenta, Alcon, Sandoz, etc.), the shares of the two Basel-based groups have significantly outperformed the overall market over the long term. This is likely to continue in the future.
Equities
Q1 corporate earnings released (WoW stock performances):
Broadcom (+1%), MongoDB (+17%), DocuSign (-15%)
NB weekly performances:
Eutelstat (-24%), Tesla (-15%)
CoreWeave (Cloud) +25%; Camurus (Swedish Lab) +25%
Analysts:
Amundi (GS ‘buy’ target €83), BAE sys (GD ‘o/w’ target £21), Euronext (MS ‘o/w’ target €172)
Rates
US curve (2-10 years) steepening stable at 47bps (Bond yields higher across the board)
HY corporate spreads slightly lower at 320-305 bps (US/EU)
Commodities
Oil price higher (+6%) among promising US China trade talks as tariffs deadline for some China made products are pushed to 31st August
Silver price higher (+9%) highest level in 13 years, mostly due to India
US
May ISM Manufacturing at 48.5 vs 48.7 prior and May ISM Services at 49.9 vs 51.6 prior
May PMI Manufacturing at 52 vs 50.2 prior (inventory build-up ahead of tariffs) and May PMI Services at 53.7 vs 52.3 prior
May NFP at +139k vs +147k prior (revised from +177k)
Under the watch
US Bond market remains under pressure hence the US Treasury support
Nota Bene
US Q2 GDP growth expected at +4.6% (Atlanta Fed’s data)
Wall Street analysts now see another 10% rally for the S&P500 in 2025 (year end predictions: DB at 6550; Wells Fargo at 7000; MS at 6500; GS at 6100; Citi at 5800; BofA 5500; JPM at 5200 and UBS at 6400)
CALENDAR
Macro Data releases:
US May CPI (11 June) expected at 2.5%; May PPI (12 June) exp. at 2.6%
Q1 corporate earnings:
US Oracle (11 June); Adobe (12 June)
EU : Inditex (11 June)
WHAT ANALYSTS SAY
- Goldman Sachs: Are the Mag7 set for a comeback? The outlook for US stocks amid rising interest rates
- ODDO BHF: The return of dividend stocks
- RAIFFEISEN: The pharmaceutical sector is under pressure
Goldman Sachs Asset Management, 6 June 2025
Authors: John Flood, Head of Americas equities sales trading; David Kostin, Chief US equity strategist
US tech giants could outperform once again
The US tech giants are set for a comeback, predicts John Flood, head of Americas Equities Sales Trading in Goldman Sachs Global Banking & Markets. After leading the market higher in 2023 and 2024, the Magnificent 7 have underperformed year-to-date. “Investors continue to ask whether these stocks are overvalued,”. “You even hear the word ‘bubble' get thrown around.” But Flood sees it differently. He notes that the Magnificent 7 companies just reported “outstanding” earnings — beating estimates by a whopping 13%.
“With rising earnings and falling stock prices, valuations are now becoming much more reasonable,”. These stocks could perform well given the economic backdrop. “They are less reliant on economic growth, which means they can become defensive during uncertain times,”. Finally, what traders call “seasonals” could also be on the Magnificent 7's side. “July is typically a powerful month for corporate buybacks, which should be an additional source of demand for these names,”. “Put it all together, and I'm looking for the Magnificent 7 to outperform the broader market this summer.”
Will rising interest rates derail US stocks ?
As the risk of sustained high tariffs on imports to the US receded in recent weeks, investors have turned their attention to another potential area of concern for the US stock market : rising interest rates. The nominal yield on 10-year US Treasury bonds rose by 40 basis points in May to 4.4%. That's up from about 3.6% in mid-September. Several factors, including a declining risk of recession, concerns about the path of US government debt, and higher borrowing costs around the world, may have contributed to the increase.
Importantly, stocks' vulnerability to rising interest rates depends more on the reasons yields are increasing than the absolute level of rates, David Kostin, Goldman Sachs Research's chief US equity strategist, writes in the team's report.
Equities usually appreciate alongside rising bond yields when the market is raising its expectations for economic growth. But stocks struggle when yields rise due to other drivers, like fiscal concerns. The team estimates that S&P 500 returns over the next 12 months will be around 9%, bringing the index to 6500.
At the same time, bond yields remaining at their current level could constrain the future valuations of stocks. Goldman Sachs Research's macro model suggests that a 100-basis-point change in real Treasury yields is associated with a roughly 7% change in S&P 500 forward price-to-earnings (P/E) multiple.
The team's model indicates that the S&P 500 currently trades close to fair value due to strong corporate fundamentals, especially among the largest stocks, and their baseline forecast assumes the P/E multiple will be roughly unchanged in 12 months.
“We expect continued economic growth and a Federal Reserve on hold will keep yields elevated, sustaining investor preference for companies with strong balance sheets that are insulated from the pressure of interest rates,” Kostin writes.
ODDO BHF, 3 June 2025
Author : Arthur Jurus, Head of Investment Office PWM
A dividend strategy involves selecting companies that pay dividends above the market average. The objective is not simply to generate income, but to build a source of performance that balances regular dividend flows with long-term upside potential.
In Switzerland, high-dividend stocks are mainly found in finance, industry and healthcare. Zurich Insurance (4.9%) and Swiss Life (4.3%) dominate the financial sector. In industry, yields are more moderate: Sulzer (2.8%), Acceleron (2.6%), SFS (2.1%), VAT (2.0%) and ABB (1.9%). Novartis offers 3.8% in healthcare. Nestlé offers 3.5% in consumer staples, Swiss Prime Site 3.0% in real estate, and Givaudan (1.7%) and Sika (1.6%) round out the materials sector. The best yields remain concentrated in defensive and insurance sectors.
Contrary to popular belief, a dividend-focused strategy does not sacrifice performance. According to MSCI data, the annualised performance of the MSCI World High Dividend Yield index has been very close to that of the MSCI World index over the past 26 years. The main difference lies in the contribution of income: in a dividend strategy, regular payments represent a larger share of total performance, reducing dependence on price movements alone.
But not all high-dividend companies are created equal. Some may have high yields simply because their share prices have fallen – often a symptom of deteriorating prospects. A serious strategy therefore focuses on companies that offer both attractive yields and a proven ability to maintain or even increase their dividends over time. It is these criteria of stability and quality that differentiate opportunistic approaches from sustainable strategies.
Dividend portfolios also have interesting sectoral and geographical characteristics. Whereas the MSCI World Index is now largely dominated by US technology giants, a dividend strategy overweight European sectors with strong cash generation: finance, industry and consumer staples. This structural diversification strengthens the portfolio's resilience by reducing its dependence on a few US mega-caps.
Furthermore, dividend-paying stocks become particularly attractive in an environment of low or falling interest rates. Today, the ECB's key interest rate stands at 2.25% and is expected to be lowered soon. Short-term sovereign bonds, such as 2-year German Bunds, offer yields of less than 2%. In this context, an annualised dividend of 3% is not only competitive, but also offers upside potential that is lacking in traditional bond assets.
Dividend-paying equities thus offer a double advantage: regular income (ideal for investors seeking yield in an uncertain environment) and participation in companies' growth potential, provided they are carefully selected. Companies that maintain or regularly increase their dividends tend to outperform in the long term, as they demonstrate financial discipline, robust cash flow and high-quality governance.
RAIFFEISEN, 3 June 2025
Author : Geoffroy Brochard, Investment Advisor
In the wake of the protectionist measures decided by Mr. Trump's administration since his second term, no sector of activity has been spared. Just recently, Mr. Trump announced the introduction on 4 June of a surcharge of 25 to 50% on imported steel and aluminium to protect his country's steel industry. The pharmaceutical sector is no exception. On 12 May, the US president issued an executive order entitled ‘Ensuring American Patients Have the Most Favoured Nation Drug Prices’. By issuing this executive order, the US president intends to force pharmaceutical companies to massively lower their prices in the United States. This means that in future, the price of a drug in the United States cannot be higher than the lowest price offered in another industrialised country.
Pharmaceutical companies immediately sounded the alarm, as the US pharmaceutical market is not only the largest, but also the most profitable. Resistance is also likely to arise. Such a radical change would require a change in the law and therefore the approval of Congress. And there, the powerful pharmaceutical lobby is likely to have its say.
The reasoning is clear: if drug prices were to fall dramatically, pharmaceutical companies' profits would decline, resulting in less funding for research.
Few MPs will want to take responsibility for this. Roche, for example, has already announced that if the most-favoured-nation clause is introduced, its investment plans in the United States will be reassessed. As a reminder, on 22 April, the Basel-based group announced an investment of $50 billion in the country over the next five years.
Due to the great importance of the pharmaceutical sector, Switzerland would be severely affected by this decree. Indeed, this sector is not only one of the main pillars of the Swiss economy, it is also well represented in Swiss indices with Novartis and Roche. The combined weight of the two multinational pharmaceutical companies in the Swiss Market Index (SMI) is over 28%. And of Switzerland's total exports of CHF 377.8 billion in 2023, CHF 135.5 billion, or 35.9%, is attributable to chemical and pharmaceutical products.
Despite the planned introduction of the most-favoured-nation clause, the longer-term outlook for the healthcare sector remains intact. This year, Roche and Novartis shares have performed in line with the broader market. There are two reasons for this:
· firstly, pharmaceutical companies' shares are currently attractively valued and many negative factors have already been priced in
· Secondly, demographic changes and an ageing population will keep demand for medicines high. Added to this are attractive dividend yields of around 4%. Finally, Novartis and Roche remain key pillars of a well-diversified portfolio. Taking into account not only their share price performance but also dividends and various spin-offs (Givaudan, Syngenta, Alcon, Sandoz, etc.), the shares of the two Basel-based groups have significantly outperformed the overall market over the long term. This is likely to continue in the future.
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