Domestic Politics

Germany is moving forward with implementing the large fiscal and defence spending announced earlier this year. Fiscal reforms are also positive, though they will fall short of expectations.

Political instability will persist in France as PM François Bayrou loses the confidence vote. The nomination of a new PM will not end the country’s political paralysis and will further fuel fiscal fears. Investors should remain underweight French OAT. French equities, especially French banks, should be bought on dips.

Peru’s April 2026 election will inject political volatility, but fundamentals are strong and we are constructive. Buy gold mining equities and gold on dips to capture the supportive global cycle and wait for a more attractive entry point for Peruvian assets.

Taiwan’s failed recall election reduces 12-month geopolitical risk for Taiwanese and Chinese equities on the margin. We are reviewing our long European industrials / short Chinese industrials trade. 

Despite macro headwinds, the OBBBA clearly favors Industrials, Financials, and Consumer Discretionary equity sectors. A carefully constructed, factor-aware basket in these sectors is well positioned to outperform in a fiscal-driven, uncertain environment. 

Acute geopolitical risks, like a massive oil shock, may be abating. But structural geopolitical risk remains high and could upset a blithe market. Cyclical economic risks are underrated as the US slows down and China continues to stumble. Investors should book some profits in anticipation of tariff implementation and a downturn in hard economic data.