As part of this new series developed in partnership with finews, we give the floor to the Chief Investment Officers of private banks and asset management companies so that they can share their reading of the markets and the broad outlines of their allocation strategies. This week, to open the ball, John Plassard gives us his vision of the markets.
In terms of allocation, where are your strongest convictions today?
To understand my current convictions, we need to go back to the break between 2024 and today. 2 years ago, the market was extremely concentrated. All you needed was exposure to the S&P 500 in dollars to generate performance. That phase is now behind us. We have now entered a much more complex environment, in which performance dispersion and macro-reading are once again decisive factors. Today, I base my allocation on three dynamics. Three Rs: resilience, repricing and reallocation.
Firstly, resilience, with the global economy holding up better than expected, particularly in the United States where growth remains above 2% despite recurring expectations of recession in recent years. Secondly, repricing, because for a long time the market anticipated a cycle of rapid rate cuts that did not correspond to economic reality. Finally, reallocation, with a marked return to diversification, which is once again becoming a central element of asset management.
Against this backdrop, I remain constructive on equities, but with a much more selective approach. I prefer companies capable of maintaining their margins in an uncertain environment, with pricing power, solid balance sheets and cash flow visibility. I am also retaining significant exposure to artificial intelligence and semiconductors, which remain structural drivers, while being alert to valuation excesses. At the same time, I'm maintaining exposure to commodities as a hedge against geopolitical risks, and I'm gradually moving back into quality bonds when interest rate levels allow me to regain some carry.
What is your central scenario today?
My central scenario remains that of a soft landing, with a probability I estimate at 55%. The idea is that the economy slows down but does not slide into recession, particularly in the United States, where momentum remains solid despite a constrained monetary environment. That said, this scenario is currently heavily conditioned by the geopolitical context. The main point of vigilance concerns the energy risk. Any lasting disruption to supplies, particularly via the Strait of Hormuz, could have a significant impact on inflation and growth.
We could then see a secondary inflationary shock, combined with an economic slowdown, and the assumption of a soft landing would obviously be called into question. Europe would be particularly vulnerable, given its energy dependence and the fragility of some of its economies, starting with Germany, whose growth has already been revised downwards.
Do you think the markets are correctly priced today?
The debate about market valuations is often too simplistic. High valuations are not in themselves a problem when they are supported by credible growth prospects. This is particularly true in sectors such as artificial intelligence, where companies have very ambitious development plans.
What has changed, however, is the level of demand from the market. Whereas a few announcements used to be enough to trigger major rises, investors are now demanding concrete results. The market has become much more discriminating, and disappointments are punished immediately.
There are also structural differences between geographical regions. The United States appears more expensive, but this premium is justified by the quality and growth profile of its large caps. Conversely, Europe remains less valued, but it is more exposed to external shocks, particularly energy shocks, and has fewer growth drivers.
Finally, there are a number of risks that I don't think have been fully integrated yet, particularly in terms of energy. A sustained rise in energy prices could weigh on corporate margins and change market expectations.
What major risks are you most concerned about in the markets today?
The main risk remains a mistake in monetary policy. Central banks are operating in an extremely uncertain environment, and the risk of miscalibrating their decisions remains high. We have seen this recently. Faced with rising inflation, some central banks were slow to take appropriate action. Today, they remain highly dependent on the data, which could lead them to miss intervention windows. The danger is twofold. Either they act too late or they don't act at all.
The energy risk I have just mentioned is real, but a mistake in monetary policy would have wider consequences, as it would affect the entire financial system and the conditions under which the economy is financed.
How have your portfolios changed over the last five years?
Management has changed radically, becoming more dynamic and responsive. The environment has become structurally more unstable, particularly with the rise in geopolitical tensions, whether it be the war in Ukraine, trade tensions or political developments. Against this backdrop, liquidity has once again become a key factor. It allows us to adapt quickly in the event of a shock and is in itself a risk management tool. We have also stepped up our demands on balance sheet quality, in order to give preference to companies capable of withstanding periods of heightened volatility.
Furthermore, the resilience of the US economy has led us to maintain an overweight position in US assets. Conversely, Europe remains more fragile, due to its energy dependence, exposure to external shocks and structural limits to growth.
Meta's acquisition of Manus was blocked by China. What is your analysis of this episode?
This episode reveals a profound paradigm shift. Artificial intelligence is no longer simply a growth or innovation issue. It is now seen as a strategic asset, in the same way as semiconductors, batteries or rare earths.
It is striking to see that a company based outside China, but born of an ecosystem of Chinese talent, remains subject to implicit political control. This suggests that the logic of technological sovereignty now takes precedence over economic logic. The criterion of "national security", which may seem vague, is in fact becoming a central regulatory tool, used in a discretionary manner.
For investors, there is the fundamental question of political risk. The Chinese environment remains attractive in terms of valuations and certain technological dynamics, but it is also marked by structural unpredictability. A decision can be called into question overnight, regardless of fundamentals.
More broadly, this episode is part of an increasingly complex confrontation between the United States and China. Artificial intelligence has become a field of direct competition, with each side seeking to control the entire value chain, from the chips to the final applications. We can see this in the restrictions on semiconductor exports, the circumvention of these restrictions, and the desire of each country to develop its own ecosystems. It's no longer just a technological rivalry, it's a power rivalry. And for the markets, this means increasing fragmentation, with investment universes that are no longer totally interconnected.