Investment Team Handelsbanken Wealth & Asset Management
24 Mar 2025 15
Below, we outline some of our key views on the factors set to drive financial markets over the coming months, and what this means for our investment strategies.
What's next for the global economy and financial markets?
Days where decades are happening
In our February update, we noted that everything we could say about the near-term outlook for the global economy came with a fistful of caveats, courtesy of President Trump’s return to the White House. As we write today, Trump’s impact on the global economy is no longer a risk that we are monitoring, but an emerging reality.
With Trump’s final (under the current rules!) four-year term as president underway, the gloves appear to be off, and it’s hard to keep up with his policy shifts and their ripple effects. Trump’s interrelated approach to global tariffs and the Ukraine-Russia war has received substantial media attention. While it’s relatively early days in terms of assessing the impact that these will have on the global economy, it’s clear that the uncertainty surrounding Trump’s policies (and, indeed, what Trump will do next) is influencing the behaviour of both businesses and consumers. This in itself runs the risk of impacting economic activity, creating marked turbulence in financial markets, which are always quick to make their feelings known.
The game has changed in Europe
Germany has re-entered the spotlight in recent history, as its new Chancellor-in-waiting, Friedrich Merz, announced plans to raise hundreds of billions of euros for extra spending on defence and infrastructure. These plans mark substantial changes for Germany’s traditionally low debt levels, as well as potentially altering the course of its previously rather anaemic economic growth prospects. In the immediate aftermath of the announcement, we saw the share prices of European infrastructure and defence businesses soar, while German bond prices fell sharply as investors predicted that more government bonds would be issued to support new spending.
In isolation, an historic loosening of the German purse strings would have been enough to create excitement in financial markets – couple this with the chaos of Trump’s tariff regime, and markets have been left in a state of disarray. It’s worth noting that tariff wars and the announcement of new German public spending also arrived at a point in time when US share prices were especially richly valued, and European share prices comparatively unloved.
Markets are struggling to keep up
Financial markets are very unnerved by trade wars, and so they should be. Without easy trade, economies struggle to grow (stagnation), and when artificial costs are added to trade, prices for businesses and consumers rise (inflation). Trade wars are therefore inherently ‘stagflationary’, and markets have no idea what to do with this prospect.
Stock markets are reacting in the most straightforward way: they don’t like this environment, so share prices are broadly falling. Bond markets don’t know what to do: low growth normally pushes investors into bonds (so bond prices rise), but inflation is typically bad for bonds because it devalues their fixed returns (so bond prices fall). The price of oil is dropping, as investors predict lower demand for energy, should economic activity slow down.
Meanwhile, one very shiny metal is bucking the trend…
Our chart of the month
Source: Macrobond
What does this chart tell us?
Gold – one of the oldest investable assets in the world – is a traditional ‘safe haven’ for investors. It’s never possible to predict exactly what financial markets will do in any circumstances (if only!), but during times of geopolitical strife or general market uncertainty, it’s certainly common for investors to head en masse to the perceived safety of gold.
Currently, there’s an additional factor pushing the gold price higher too: central banks are buying gold, shoring up their reserves amid growing global uncertainty. We’re happy to say that we are long-term holders of gold positions across our multi asset funds.
Scroll down the page to the sections below to find out what our market views mean for positioning in our investment strategies.
- Towards the end of 2024, we slightly shifted the balance of assets held in our multi asset strategies, which resulted in our strategies holding slightly more in stock market investments than in the recent past.
- We favour the shares of larger businesses, as well as positions in healthcare, insurance and clean energy.
- With a few key exceptions, we currently prefer to limit the bulk of our stock market exposure to developed economies. We favour US shares over every other market, including the UK.
At the time of this update, we are slightly 'overweight' stock markets/shares. This means that we have deviated for tactical reasons from our asset allocation framework - a way of dividing investments across different types of assets. As a result, our multi asset strategies currently hold a relatively larger proportion of investments in stock markets versus our long-term average.
- Towards the end of 2024, we slightly shifted the balance of assets held in our multi asset strategies, which resulted in our strategies holding slightly less in bond market investments than in the recent past.
- Having been a rather uninteresting part of financial markets for quite some time, bond yields rose higher in 2023 than they had done for many years (and bond prices, which always move in the opposite direction to yields, fell). This presented what we perceived to be an attractive buying opportunity.
- We still think bonds look attractive over the long-term, with yields at meaningfully higher levels than any point in recent years. However, rising government debt (and the subsequently higher supply of government debt to the market) is among the factors giving us pause for thought.
At the time of this update, we are 'neutral' when it comes to bond markets. This means that we have not deviated for tactical reasons from our overall asset allocation framework - a way of dividing investments across different types of assets. As a result, our multi asset strategies currently hold a proportion of investments in bond markets which is consistent with our long-term average.
The ‘alternative’ investment space covers a diverse range of assets outside of traditional bond and stock markets, from commercial property to specialist hedge funds. Because of their wide variety, it’s difficult to make sweeping statements about alternative assets, and our overall ‘underweight’ stance in this diverse area of the markets hides some specific preferences.
At present, we have a preference for assets which can drive financial returns, without being closely linked to mainstream financial markets. Among our positions in property investments, we have a preference for global assets over UK-based assets, believing that this allows us to access a much more diverse array of property, from data centres to telecoms towers.
Other notable positions include a long-term portfolio position in gold, and a specialist hedge fund designed to protect against dramatic market falls.
At the time of this update, we are slightly 'underweight' alternative assets. This means that we have deviated for tactical reasons from our asset allocation framework - a way of dividing investments across different types of assets. As a result, our multi asset strategies currently hold a relatively smaller proportion of investments in alternative assets versus our long-term average.
If you’d like further information on how we divide investments in our strategies across different types of assets (i.e. our asset allocation framework, and our tactical deviations away from it), please contact us.
Important Information
Handelsbanken Wealth & Asset Management Limited is authorised and regulated by the Financial Conduct Authority (FCA) in the conduct of investment and protection business, and is a wholly-owned subsidiary of Handelsbanken plc. For further information on our investment services go to wealthandasset.handelsbanken.co.uk/important-information. Tax advice which does not contain any investment element is not regulated by the FCA. Professional advice should be taken before any course of action is pursued.
- Find out more about our services by contacting us on 01892 701803 or exploring the rest of our website: wealthandasset.handelsbanken.co.uk
- Read about how our investment services are regulated, and other important information: wealthandasset.handelsbanken.co.uk/important-information
- Learn more about wealth and investment concepts in our Learning Zone: wealthandasset.handelsbanken.co.uk/learning-zone/
- Understand more about the language and terminology used in the financial services industry and our own publications through our Glossary of Terms: wealthandasset.handelsbanken.co.uk/glossary-of-terms/
All commentary and data is valid, to the best of our knowledge, at the time of publication. This document is not intended to be a definitive analysis of financial or other markets and does not constitute any recommendation to buy, sell or otherwise trade in any of the investments mentioned. The value of any investment and income from it is not guaranteed and can fall as well as rise, so your capital is at risk.
We manage our investment strategies in accordance with pre-defined risk objectives, which vary depending on the strategy’s risk profile.
Portfolios may include individual investments in structured products, foreign currencies and funds (including funds not regulated by the FCA) which may individually have a relatively high risk profile. The portfolios may specifically include hedge funds, property funds, private equity funds and other funds which may have limited liquidity. Changes in exchange rates between currencies can cause investments of income to go down or up.
This document has been issued by Handelsbanken Wealth & Asset Management Limited. For Handelsbanken Multi Asset Funds, the Authorised Corporate Director is Handelsbanken ACD Limited, which is a wholly-owned subsidiary of Handelsbanken Wealth & Asset Management, and is authorised and regulated by the Financial Conduct Authority (FCA). The Registrar and Depositary is The Bank of New York Mellon (International) Limited, which is authorised by the Prudential Regulation Authority and regulated by the FCA. The Investment Manager is Handelsbanken Wealth & Asset Management Limited, which is authorised and regulated by
the FCA.
Before investing in a Handelsbanken Multi Asset Fund you should read the Key Investor Information Document (KIID) as it contains important information regarding the fund including charges and specific risk warnings. The Prospectus, Key Investor Information Document, current prices and latest report and accounts are available from the following webpage: wealthandasset.handelsbanken.co.uk/fund-information/fund-information/, or you can request these from Handelsbanken Wealth & Asset Management Limited or Handelsbanken ACD Limited: 77 Mount Ephraim, Tunbridge Wells, Kent, TN4 8BS or by telephone on
+44 01892 701803.
Registered Head Office: No.1 Kingsway, London WC2B 6AN. Registered in England No: 4132340