Currencies

In this report, we explore what a new BRICS+ union means for the dollar over the next 6-to-9 months.

In Part 2 of this series, we prescribe the treatment needed to produce a recovery for the ailing Chinese economy. Authorities will only panic and unleash “irrigation-style” stimulus if the unemployment rate rises sharply, or a financial crisis unravels in onshore markets. This is not yet the case.

The stock market’s pre-eminent growth sector is not US tech, it is French luxuries. No other sector can compare with French luxuries’ massive and sustained pricing power. The risk for French luxuries is not a China slowdown, the risk is that the structural increase in super-wealth comes to an end. If anything though, the coming disruption from generative AI will boost super-wealth. Ironically therefore, the best investment play on generative AI might be French luxuries.

Investors should underweight global equities and risk assets; overweight US stocks relative to global; and overweight defensive sectors versus cyclicals.

A global portfolio is likely to return only 5.3% a year over the next decade, compared to 6.7% in the past. Investors either need to lower their return expectations, or take more risk. Our total return methodology remains consistent with previous editions, with changes limited to the Alternatives section.