US outlook improves as AI spending surges

The macroeconomic environment continues to be constructive. The impact of the trade war has proven more limited than feared. At the same time, a glut in oil is not only positive for growth but also has a dampening effect on inflation. Although we believe that Trump’s tariff and immigration policies are still not fully reflected in the data, we see a stronger positive impact from high AI spending and both fiscal and monetary stimulus in the US. Important to note, is that the US is the main beneficiary of the AI boom, as most AI investments are taking place in the US. Although the US labour market is expected to cool only slightly, we do expect the Fed to continue with several rate cuts, which are stimulative for the economy and financial markets. We have increased our growth expectations for the US for next year and also increased our inflation expectations. In Europe, tariff-related effects remain a headwind, but higher domestic demand from earlier rate cuts and increased investments in defence and infrastructure will support growth. However, we still expect growth in the euro area to be below that of the US.

Developments in the macroeconomic environment and the expectation of continued strong US earnings growth, have made us more positive on US equity markets. We expect double-digit earnings growth for both the US and the Eurozone in 2026, but we have a stronger conviction in our US expectations and the ability of US companies to improve margins. In earlier years, European equities have regularly surprised to the downside when it comes to earnings growth, while the US has often outperformed. This trend could continue in 2026, driven by strong AI-related investments and both monetary and fiscal stimulus in the US, which result in higher economic growth expectations for the US than for Europe.

Although US valuations are stretched and currently questioned by the market, we see the above factors and the higher economic growth expectations in the US as an important reason to favour the US over Europe. Moreover, political uncertainty continues to be a headwind in Europe, while positive factors such as the implementation of the Draghi report are progressing more slowly than anticipated. With this in mind, we are increasing our positioning in US equities from neutral to overweight while simultaneously decreasing our positioning in European equities from neutral to underweight. Emerging markets remain on neutral.

As we see the risk-on environment continues, we are shifting our sector allocation accordingly. Specifically, our overweight position in the defensive healthcare sector is reduced from overweight to neutral. Here, we choose this moment now that deals between the sector and the Trump administration have led to a more attractive price level. Furthermore, we are increasing our position in the more cyclical materials sector from underweight to neutral. This sector benefits from increased growth expectations, while the European investments in defence and infrastructure can be tailwinds for the sector.

Gold has seen an incredible rally this year, despite a sharp decline in late October. It has rallied mostly due to a weakening US dollar and because central banks have been net buyers of the precious metal, especially in emerging markets. The de-dollarisation of central banks specifically is a trend that we expect to continue for the foreseeable future, thus providing a long-term tailwind for the commodity.

Additionally, we expect the dollar to weaken further in 2026, which is a continuing tailwind for gold. The gold price has already partially recovered last month’s decline, but the decline has still provided the market with some breathing room. Finally, the low correlation between gold and other asset classes makes it attractive for portfolio diversification. Although we believe that the rally of this year limits the short-term upside, we see long-term trends and gold’s diversification benefits as reasons to increase our gold position from 3% to 5%. We fund this increase with cash and government bonds.

Bond yields have stabilised recently, due to less uncertainty about the economy and Fed policy. As a result, we have little reason to change our view on the fixed income market for now. In short, that means we retain a neutral view on the overall bond portfolio. Within bonds we maintain a preference for high-quality bonds, especially securitised bonds. Riskier bonds remain out of favour, especially high-yield corporate bonds as investors are not compensated enough for the risk they take.

A combination of solid third-quarter earnings, high profit margins and large investments from both governments and AI-related companies have made us more optimistic about the global macroeconomic outlook. Moreover, the AI-investment focus is on the US, and we expect economic growth in the US to be higher than in Europe. Therefore, we increased our US equity positioning from neutral to overweight, while decreasing our position in European equities from neutral to underweight positioning. On a sector level, we go more ‘risk-on’ by reducing our position in the healthcare sector to neutral while simultaneously increasing our position in the materials sector to neutral. Finally, we expect structural tailwinds for gold to continue while appreciating its diversification benefits, which is why we increase our position in the precious metal.

Richard de Groot 
Chair Global Investment Committee