Monthly House View
04.08.20253 min
Monthly House View August-September 2025: Hot Summer, Cold War
Several bilateral trade agreements have now been concluded between the United States and its main trading partners (the United Kingdom, Japan, and Europe), allowing market participants to gain a clearer view of trade policy.
Meanwhile, second-quarter earnings season shows that the productivity gains generated by Artificial Intelligence (AI) are beginning to make an impact, suggesting that future profit growth could remain strong.
Artificial Intelligence
Alphabet, for instance, reported in its quarterly publication on 23 July an increased adoption of its new AI tools, thereby boosting their use to satisfy search queries. In its 25 July editorial, the British magazine The Economist fuelled the debate by asserting that AI's capabilities have exceeded expectations.
This technological acceleration could lead to another acceleration: that of economic growth, as AI automates the discovery of ideas and generates technological advances without human intervention. These developments could have profound societal impacts. For businesses, AI offers opportunities for increased profitability by automating complex tasks and improving operational efficiency.
Monetary policy
On the economic outlook, when it comes to assessing the impact of trade agreements on activity, the mood is still one of relief, even though the direction is not necessarily positive (more tariffs, not fewer) ... which, incidentally, highlights the panic caused by Trump's communication during "Liberation Day." Their impact on currencies, however, is more nuanced. In particular, the weakness of the dollar appears to have stabilised, likely due to excessively bearish speculative positioning.
We remain cautious on the dollar in the medium-term. As Bénédicte Kukla points out, the reacceleration of inflation expected in the United States in the coming months could be weaker than initially anticipated. The consequence? The Federal Reserve (Fed) is likely to be inclined to resume its easing cycle as early as the autumn.
Investment Strategy
The combination of profit growth and upcoming monetary easing supports stock markets -- including the US market -- and the weight of equities is mechanically increasing in portfolios. While in previous months we took advantage of the rebound to take profits, this month we have decided to "let go" and accept a higher weighting in US equities. As you can see in the new allocation grid, we are now back to a "neutral" weighting in listed equities.
Budgetary Challenges and the Role of Central Banks
Hans Bevers examines, among other things, concerns about public finances in the United States and explains why they are not unfounded. To ensure fiscal credibility, the economic policy pursued by the Republican administration will need to generate growth in activity that exceeds its impact on interest rates.
The current dynamics could significantly impact financial markets, and, as we noted in last month's editorial, the role of central banks -- as guarantors of stability -- continues to grow. In recent years, they have maintained a monetary policy favourable to growth while preserving their independence.
But could this independence be challenged? Alexander Bell outlines three reasons why a loss of Fed independence would be counterproductive.
Enjoy the read!
The Monthly House View is published each month. This publication is the result of a close collaboration between Bank Degroof Petercam and Indosuez Wealth Management, offering you a comprehensive analysis of market trends and developments.
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