From the Classic 60/40 Portfolio to the 40/30/30 Strategy: It Is the Moment for Alternatives

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For decades, the famous 60/40 portfolio, which allocates investments with 60% in stocks and 40% in bonds, was considered the standard model of diversification for conservative and moderate investors. But times have changed, and with them, the fundamentals that supported this strategy. A recent report published by Candriam questions the current effectiveness of this traditional model in the face of an economic landscape marked by volatile inflation, persistently high interest rates, and growing geopolitical tensions. In addition, it highlights the relevance of including alternative assets in portfolios.

Although stocks performed well in 2023 and 2024, driven by moderating inflation, future expectations are more modest. Interest rates continue to constrain equity valuations, while bonds continue to offer reduced returns and less protective capacity. The consequence: the breakdown of the balance that made the 60/40 model a reliable option to face adverse scenarios.

The study underscores that despite its strong historical performance over the past two and a half decades, the risk profile of the 60/40 has generated serious concerns. A nominally allocated portfolio in this proportion has shown a correlation close to 1 with the equity market, which in practice makes it a reflection of stock behavior. This means that in times of crisis, such as in 2008 or during the market collapse due to the pandemic in 2020, the 60/40 did not offer the protection many expected. For most investors, losses exceeding 30% are not acceptable, which raises the urgency to review the model and seek additional, more resilient sources of diversification.

The document, signed by Johann Mauchand, Pieter-Jan Inghelbrecht, and Steeve Brument, proposes a new formula to restore diversification and improve the risk-return profile of portfolios: the 40/30/30 strategy, which includes alternative assets as a third key component.

Increasing Portfolio Resilience: The 40/30/30 Approach
For Candriam, the answer lies in diversifying beyond traditional instruments. The proposal: to replace 30% of a 60/40 portfolio with alternative assets, using the Credit Suisse Hedge Fund Index as a reference. The result, according to the historical analysis, is compelling: higher returns, lower volatility, and better downside protection.

The new 40/30/30 portfolio, composed of 40% stocks, 30% bonds, and 30% alternatives, showed a 40% improvement in its Sharpe ratio, a metric that assesses risk-adjusted returns. Even using a passive index-based allocation, the benefits were significant.

Charting a New Direction
Candriam’s study warns about a crucial aspect that many investors overlook: not all alternative assets are the same, nor do they behave in the same way under different market conditions.

Using broad indices as a reference is useful as a starting point, but it also highlights a structural challenge: the universe of hedge funds and alternative strategies is immensely diverse, and their performance can vary significantly. The difference between properly selecting which type of alternative to include in a portfolio—or not—can have a decisive impact on the final outcome.

To address this problem, Candriam proposes a functional allocation framework designed to go beyond the simple grouping of assets under the “alternatives” label. Instead of treating these strategies as a homogeneous block, the firm suggests classifying them according to the functional role they play within a portfolio, dividing them into three broad categories: downside protection, generation of uncorrelated returns, or capture of upside potential.

This segmentation enables the construction of more resilient and efficient portfolios, adjusting them dynamically according to the economic environment. The key, according to Candriam, lies in an active and centralized allocation that responds to market changes in real time.

Implications for Asset Allocation
Candriam concludes that adopting this more flexible and functional approach can improve results in three essential dimensions: higher returns, lower risk, and better-controlled drawdowns. To achieve this, it recommends two simple but powerful actions: selecting alternative assets that fulfill one of the three defined roles and dynamically rebalancing the portfolio according to the macroeconomic context.

The conclusion of the report is clear: the 60/40 model is not dead, but it does need a thorough revision. In an increasingly uncertain environment, the strategic inclusion of alternative assets could be the key to building truly diversified portfolios prepared for the future.

Vanguard Reduces Fees on Its Range of Fixed Income ETFs Available to European Investors

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Vanguard has announced the reduction of fees on seven of its fixed income exchange-traded funds (ETFs) available to European investors, effective July 1, 2025. According to the firm, this measure reinforces Vanguard’s commitment to making fixed income investing more accessible, especially in a context where bonds are playing an increasingly important role in investors’ portfolios.

“The bond market is currently twice the size of the equity market, but it remains opaque and costly. Investors deserve something better. At Vanguard, we believe that in investing, you get what you don’t pay for. Costs matter. By reducing fees, we are helping to make fixed income more accessible and transparent. We estimate that these changes will represent approximately 3.5 million dollars in annual savings for investors. We have already expanded, and will continue to expand, our fixed income offering throughout this year,” said Jon Cleborne, Head of Vanguard for Europe.

The following ETFs will have their fees reduced starting July 1.

Vanguard Positions Itself in Fixed Income
Vanguard is the second largest asset manager in the world, with 10.5 trillion dollars in assets under management globally as of May 31, 2025. Its fixed income group, led by Sara Devereux, manages more than 2.47 trillion dollars globally, combining deep expertise to deliver precise index tracking, prudent risk management, and competitive performance.

Earlier this year, Vanguard expanded its range of European fixed income products with the launch of the Vanguard EUR Eurozone Government 1–3 Year Bond UCITS ETF, Vanguard EUR Corporate 1–3 Year Bond UCITS ETF, Vanguard Global Government Bond UCITS ETF, and Vanguard U.K. Short-Term Gilt Index Fund.

Following these changes, the weighted average asset fee of Vanguard’s European range of index and actively managed fixed income funds will be 0.11%. Currently, Vanguard offers 355 fixed income index products in Europe, and on average, its range of fixed income ETFs is the most cost-effective in the European market. Across its entire product offering in Europe, the weighted average asset fee will now be 0.14%.

Companies Risk Suffering More Acute Supply Chain Failures in 2025

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In this 2025, organizations face an increased risk of suffering acute supply chain failures as a result of growing global geopolitical tensions and protectionist trade strategies, according to a new report published by Marsh.

According to its analysis, in addition to the risks associated with the reconfiguration of global trade and geopolitics, the report concludes that changing market and policy dynamics present both challenges and opportunities for organizations in the energy transition, especially regarding carbon credit markets (CCMs) and debt-for-nature swaps (DFNSs).

One of the findings highlighted in the report is that organizations trading with connector countries to circumvent existing or anticipated trade controls, or that have suppliers doing so, may be more exposed to disruptions induced by trade policies in the months and years ahead. “As a result of deteriorating relations between major trading partners, governments may also impose trade barriers on goods coming from connector countries, especially those that include components from the originally targeted country, which could create significant volatility in the global supply chain,” it notes.

What Can Companies Do?

To improve their resilience to supply chain shocks arising from the current geopolitical landscape, the report recommends that organizations review China’s commitment to its trade strategy and the underlying objectives of U.S. trade policy, and consider to what extent the current connector model will persist in relation to their business models.

The Political Risk Report states that changing market and policy dynamics present both challenges and opportunities in the energy transition, echoing the findings of the World Economic Forum Global Risks Report 2025, in which environmental risks dominate the 10-year horizon.

While global CCMs made significant progress at COP29 and DFNSs have also gained momentum, challenges remain in both areas regarding political risk and the possibility of default. Additionally, the growing climate compliance obligations, especially those stemming from new European Union regulations, may present operational risk challenges for organizations.

“Increased risks around the economy, geopolitics, and climate change are creating an incredibly complex operating environment, unlike anything organizations have experienced in decades. Those who build their ability to understand, assess, and mitigate the risks facing their operations are likely to be better positioned to identify opportunities where others only see ambiguity and to gain a competitive advantage in these uncertain times,” said Robert Perry, Global Head of Political Risk and Structured Credit at Marsh Specialty, in light of these findings.

High-Net-Worth Families Around the World Are Accelerating the Transfer of Wealth to Their Heirs

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The “Great Wealth Transfer” is underway, and inheritance patterns are changing, with significant implications for the distribution of wealth and financial markets. A study by Capital Group, a firm specialized in active investments with approximately $2.8 trillion in assets under management, indicates that high-net-worth (HNW) families around the world are accelerating the transfer of wealth to their heirs.

The study surveyed 600 high-net-worth individuals from Europe, Asia-Pacific, and the U.S. to understand their approach to inheritance and their own succession planning.

“It is estimated that in the coming decades, baby boomers in the United States, Europe, and developed countries in Asia will transfer trillions of dollars to younger generations. Millennials and Generation Z are receiving larger inheritances at a younger age and could benefit from a financial advisor’s market knowledge and long-term investment perspective. At Capital Group, we have built lasting partnerships with wealth managers based on the belief that expert financial advice and strong long-term investment performance drive better outcomes for asset holders and their beneficiaries,” says Guy Henriques, President of Distribution at Capital Group in Europe and Asia.

Attracting the Next Generation of High-Net-Worth Individuals
According to the study, nearly half of all respondents (47%) inherited directly from their grandparents, and the majority (55%) received between $1 million and $25 million. Millennials are more likely to turn to social media and “finfluencers” for investment advice when inheriting (27%) than to financial advisors (18%). Furthermore, 65% of Generation X and Millennial heirs who participated in the study say they regret how they used their inheritance money, and nearly two in five wish they had invested more.

In the case of Spaniards, they are more likely to invest their inheritance: 37% compared to the 33% global average.

Maximizing the Potential of Inheritance
According to a recent study, three quarters of respondents say they have difficulty communicating their inheritance plans, and the majority turn to lawyers (61%) or accountants (49%) to manage them, while only 20% turn to financial advisors.

Additionally, 79% do not specify how the inherited capital should be used, which contributes to much of that money remaining idle or underutilized: only 22% is invested in funds and just 11% is allocated to pension plans.

This lack of strategy is reflected in the dissatisfaction of asset holders: 60% are unhappy with how they used their inheritance, and one third regret not having invested enough. In Spain, 54% of high-net-worth individuals wish they had directed more of their inheritance toward investment.

“Our study reveals that most of these asset holders wish they had used their inheritance differently and invested more. At Capital Group, our mission is to improve people’s lives through successful investing. We believe that if they consider investing part of their newly acquired capital, individuals with substantial wealth could build long-term prosperity. As a company with 94 years of experience, we have partnered with clients to invest across multiple generations, and as markets rise and fall, it is important to remember the value of staying invested for the long term,” concludes Guy Henriques, President of Distribution at Capital Group in Europe and Asia.

41% of Global Asset Owners Use Multiple Benchmarks for Their Investments

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41% of global asset owners use multiple benchmarks, while 59% continue to use only one. These are the findings from the “Asset Owner Performance Survey According to GIPS Standards,” conducted by the GIPS Standards Asset Owner Subcommittee and CFA Institute Research, the global association of investment management professionals, in 2024.

“Benchmarks based on asset allocation weighting are the most widely used, with 61% of asset owners employing this type of benchmark. For target returns, the most prevalent is the benchmark based on the actual weightings of asset classes,” explains Hugo Aravena, President of CFA Society Chile.

The GIPS standards are ethical guidelines for calculating and presenting investment performance, based on the principles of fair representation and full disclosure. In recent years, more asset owners have opted to follow these standards. 24 of the 25 most prominent managers in the world state that they comply with the GIPS standards in full or in part when presenting their returns.

The survey shows that 93% of respondents are at least somewhat familiar with the GIPS performance standards, and 67% of the sovereign funds surveyed are in compliance with the GIPS standards, “which demonstrates that the GIPS standards are of utmost importance to sophisticated investors managing large volumes of assets globally.” According to the study, more than two-thirds (68%) require or inquire about GIPS compliance when selecting external managers of liquid asset classes, and 19% require a declaration of compliance for selection.

“Compared to the 2020 report, more asset owners now state that they comply with the GIPS standards, plan to do so in the future, or inquire about compliance when hiring firms to manage their investments. This shows a growing demand for financial performance to be presented in a transparent and fair manner,” says Aravena. Additionally, 8% require their external managers of illiquid assets to declare GIPS compliance, while 41% of them either require or inquire about GIPS compliance when selecting external managers.

Finally, 59% of investors indicate that they already present the returns required by the GIPS standards (i.e., net of fees and costs) to their supervisory body. “We are aware of the need to advance in presenting risk and return indicators that comply with international standards, so that investors have access to more transparent, complete, and standardized information, making it easier to compare among similar investment alternatives,” concludes Aravena.

From Calm in Financial Markets to Sensitive Assets: What Is the Message Amid the Middle East Conflict?

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In less than 24 hours, we have gone from a possible military escalation in the Middle East—following the hostilities between Iran, Israel, and the U.S.—to an announcement of a “ceasefire” and a certain de-escalation of tensions. According to investment firms and international asset managers, this geopolitical situation is clearly reflected in oil prices, but what stands out most is the apparent calm observed in financial markets.

According to Thomas Hempell, Head of Macro and Market Research at Generali AM (part of Generali Investments), on Monday, markets in general reacted with risk aversion, with rising oil prices and falling equity markets.

“Surprisingly, the U.S. dollar initially rose, but that quickly faded, reinforcing concerns about its weakening status as a safe haven. Still, this marks an improvement over the U.S. dollar’s negative response to the growing trade tensions in recent weeks. In fact, a sharper increase in energy costs would hurt energy importers (including the eurozone and Japan) the most, while the U.S. has become a net oil exporter,” Hempell noted. In his view, Treasuries (and bunds) also failed to act as safe havens, with 10-year U.S. debt yields trading around 4.40%.

Meanwhile, stock markets are reacting positively to the Middle East de-escalation, while oil prices fell 3% on Tuesday, and in Europe, gas prices dropped 11%. “The muted Iranian response and rapid ceasefire point to a scenario of de-escalation in the coming days, which will shift attention back to the tariff moratorium—set to expire in 15 days—and to the negotiations over the U.S. tax reform currently in the Senate,” analysts at Banca March acknowledged in their daily report.

“Military conflicts are always unpredictable. Even Middle East experts struggle to anticipate how this war will unfold and what its consequences will be in the coming days, weeks, or months. Before the war between Israel and Iran began, the evolving world order and changing geopolitical landscape—marked by tariffs and trade wars—were already adding uncertainty to expected returns across all asset classes,” analysts at AllianceBernstein noted.

Most Sensitive Markets and Assets

According to Kerstin Hottner, Head of Commodities at Vontobel, and portfolio managers Regina Hammerschmid and Renato Mettler, although there was a widespread expectation of rising oil prices and a flight-to-safety sentiment to start the week, the European market reaction was quite different. “Brent crude futures opened with a sharp increase in Asia at $81, before retreating ahead of the European open and trading just above Friday’s close at around $77.10. Risk aversion was moderate across all asset classes, with equities and bond yields slightly down and the U.S. dollar strengthening. Curiously, gold demand was limited despite rising geopolitical tensions. The muted response suggests markets are in a wait-and-see mode, particularly focused on how Iran will respond in the coming days. So far, the U.S. has announced a 12-hour ceasefire. What happens next will be crucial,” said the experts at Vontobel.

Ebury analysts believe the Israel-Iran war will dominate the currency market following U.S. involvement. In this context, “the U.S. dollar appears to be maintaining its status as a safe-haven currency during times of severe geopolitical instability and has risen against all major global currencies,” they explained. They also noted that the euro is trading almost entirely in response to external events—particularly the war between Israel and Iran—and “is broadly affected by rising oil prices and the fact that Europe is a large net energy importer, whereas the U.S. is an exporter,” the Ebury analysts pointed out. They expect the same trend to persist this week: “The euro opened lower as oil prices continue to climb.”

No Rushing to Conclusions

According to U.S.-based asset manager Payden & Rygel, tensions in the Middle East captured investors’ attention this week, causing market movements just weeks after U.S. equities had recovered from an 18.9% decline. However, they advise staying calm amid the turmoil.

“First, a review of geopolitical crises since 1939 suggests the average market drop from geopolitical events is only 5.6% and lasts just 16 days. Second, markets tend to recover quickly. In 60% of cases, the S&P 500 regained losses within a month of the bottom, and in 80% of cases within two months. Exceptions are usually crises that trigger or coincide with a recession or persistent inflation that keeps federal funds rates elevated, like the 1973 oil embargo. Third, the average return 12 months after a geopolitical crisis was 14%, well above the S&P 500’s average annual return during ‘normal’ times. In other words, unless a recession or rate hike by the Fed is expected in the next 6 to 12 months, a long-term view and looking beyond short-term volatility is advisable,” they said.

A similar message comes from Gregor MA Hirt, Global CIO of Multi Asset at Allianz Global Investors: “Investors should prepare for short-term turbulence in energy prices and inflation expectations. However, as in past crises, excessive market moves could offer compelling opportunities. Central banks—particularly the Fed—may need to reconsider their policy paths if inflation accelerates while growth slows.” For MA Hirt, the coming days will be key in assessing damage to Iranian nuclear facilities, the scale of Iran’s response, and the stance taken by the international community. “All of this will shape market sentiment in the short term,” he added.

Furthermore, Dan Ivascyn, CIO at PIMCO, reminds investors that uncertainty can be a tailwind for fixed income. Ivascyn acknowledges that the market may be witnessing a reversal of U.S. exceptionalism and that other markets may become more profitable, creating an opportunity to diversify away from the U.S.

“This year’s price movements and news are an example of how uncertain the macroeconomic environment is. It’s always important to remind investors that current income drives a significant portion of fixed income returns. Despite high volatility, returns have been quite solid—especially if holding a global portfolio with non-dollar-denominated assets and higher-quality emerging markets. At PIMCO, we take a long-term orientation, use all tools at our disposal, acknowledge great uncertainty, reinforce portfolio resilience, and strive to deliver highly attractive returns for our clients,” Ivascyn stated.

Resilient Portfolios and Caution

Asset managers also emphasize that predicting the outcome is not the game to play, which is why they focus on building resilient portfolios. “The coming weeks present multiple risks to markets, including developments in U.S. tariffs and other policies—but these are two-sided risks, as markets could also ‘climb the wall of worry’ once they pass,” argued Salman Ahmed, Global Head of Macro and Strategic Asset Allocation at Fidelity International.

In his view, from an asset allocation perspective, this is a time to stay broadly neutral toward risk while taking more granular views across regions and asset classes—buying and selling very selectively. “Diversification remains key, as does the flexibility to actively manage risks—including currency positions and selective hedges (e.g., gold),” he noted.

Meanwhile, Michaël Nizard, Head of Multi Asset and Overlay, and Nabil Milali, Multi Asset and Overlay Manager at Edmond de Rothschild AM, acknowledge that in this context, they maintain a cautious view of equity markets amid ongoing economic and geopolitical uncertainty—especially as valuations have returned to high levels. “As for fixed income investments, we hold a neutral duration stance and continue to favor carry strategies, while the dollar’s failure to reclaim its safe-haven status reinforces our negative view,” added the Edmond de Rothschild AM experts.

BoE, BoJ, and Fed: Three Meetings That Highlight the Divergence Among Central Banks

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Central banks take center stage this week, as the Bank of England (BoE), the Bank of Japan (BoJ), and the U.S. Federal Reserve (Fed) will hold their respective meetings. These three monetary institutions have been less active than the European Central Bank (ECB), which has cut interest rates by 25 basis points at each meeting since last September, so expectations for further changes are low.

How have these central banks behaved so far? The BoE’s monetary policy has positioned itself between that of the Fed and the ECB. “Rates have been lowered by 25 basis points per quarter, but concerns about inflationary pressures—exacerbated by rising regulated prices and increases in employment-related taxes—have slowed a faster pace of monetary easing, amid divided opinions among BoE policymakers. A more decisive rate cut is likely approaching, given signs of declining employment, unfilled vacancies, and wage growth, but a cut as early as June would surprise the market,” notes Sean Shepley, senior economist at Allianz GI.

In contrast, the BoJ remains a case apart: while other central banks have hesitated to lower rates in a persistent inflation environment, the BoJ has been reluctant in recent months to raise rates from its current ultra-loose policy, despite inflation exceeding its target. “The institution remains focused on shifting domestic inflation expectations away from levels close to zero and sees risks to growth as potential obstacles to achieving that goal. All indications suggest that, for now, this inaction will remain the BoJ’s prevailing stance,” adds Shepley.

Since December, the Federal Reserve has kept its monetary policy unchanged, after swiftly reducing its target rate from 5.25% to 4.25% over the last four months of 2024. For this meeting, it is expected to maintain the status quo, as it has shown reluctance to take new action.

According to Erik Weisman, Chief Economist at MFS Investment Management, the only point of interest may come from the new set of forecasts in the Summary of Economic Projections (SEP), which could point to slightly slower growth, combined with slightly higher inflation.

“We’ll also be watching the dots—the Fed’s interest rate forecasts—which could shift to indicate only one rate cut this year. Overall, none of this is likely to surprise investors. The Fed will probably acknowledge that the backdrop remains uncertain, and that the best course is to do nothing. As for potential rate cuts, it’s fair to assume they’ve been delayed, and none is likely before the fourth quarter of this year,” Weisman argues.

Focus on the Fed

Although no changes or cuts are expected from the Fed, investment firms agree that the pressure on Powell and the central bank has increased. “One of the hallmarks of U.S. President Donald Trump’s two terms has been his willingness to publicly challenge the Fed Chair whenever he believed interest rates were too high or that the institution had acted too slowly. In fact, Trump has claimed he should participate in monetary policy decisions and has attempted to undermine the central bank’s authority. Moreover, before taking office, U.S. Treasury Secretary Bessent even said that if the government announced in advance who the next Fed Chair would be, it could weaken the current chair’s power,” notes the senior economist at Allianz GI.

These pressures are compounded by the complex geopolitical environment. “If not for exogenous shocks, tariffs, and oil, it seems the Fed has successfully concluded the post-pandemic monetary policy cycle, to borrow Christine Lagarde’s phrasing about the ECB two weeks ago. May’s U.S. CPI data was particularly encouraging. While it’s highly likely that the Fed will reaffirm its ‘wait and see’ stance this week, the FOMC’s dot plot for 2026 and 2027 could show some divergence among members, with hawks and doves emerging, divided over the risks of persistent inflation in the U.S. We wouldn’t be surprised if only one rate cut is shown in the new dot plot. However, we believe the longer-term dots will be more interesting,” says Gilles Moëc, Chief Economist at AXA IM.

According to his estimate, assuming the median projection remains unchanged from March, three cuts (to 3.37%) are expected in 2026. “However, the dispersion around the median might be more telling than the median itself. In fact, we could see a group of doves pushing for quicker cuts and faster convergence toward neutrality,” he adds.

Will the Fed Make More Cuts?

Philip Orlando, Senior Vice President and Chief Market Strategist at Federated Hermes, sees potential for the Fed to cut rates twice this year. “CPI and PCE inflation indicators have declined year-to-date through April and are now at four-year lows. The Fed’s June 18 monetary policy meeting includes an updated summary of economic projections. Officials will need to reconcile their restrictive monetary policy—since the upper bound of the federal funds rate is currently at 4.5%—with the fact that nominal CPI is only 2.3% year over year,” he explains.

In his view, there is significant room to lower rates to 3% over the next 12–24 months, and he expects two quarter-point cuts later this year: “The most likely timing would be September and December, and we expect the Fed to set the stage for these cuts at its June and July 30 FOMC meetings, as well as at its Jackson Hole summit in Wyoming from August 21 to 23. With the prospect of lower rates and no recession on the horizon, we maintain our target of 6,500 for the S&P 500 this year and 7,000 in 2026,” he says.

Markets Watch the Dot Plot

Finally, Harvey Bradley, Co-Head of Global Rates at Insight Investment, notes that beyond Fed Chair Powell’s press conference, markets will closely watch the Fed’s quarterly dot plot for signals on how and when the central bank might resume its cutting cycle.

“In both March and December, the median projection was for two rate cuts by year-end, which is roughly what markets are currently pricing in. Given the uncertainty facing markets, it’s difficult to predict whether the forecasts will change significantly. On one hand, Fed members may now factor in a higher effective tariff rate, with early signs of tariff-related inflation beginning to show. On the other hand, less volatile—or ‘stickier’—sources of inflation, especially in major categories like rent, are showing impressive and potentially sustainable signs of disinflation. The labor market is also showing some cracks, with continuing jobless claims at cycle highs. This could help the Fed continue normalizing its monetary policy. Altogether, the projections may remain largely unchanged,” he argues.

Insight’s base case is for two cuts this year, followed by further reductions in 2026 toward a terminal rate of 3%, driven by below-trend growth outcomes—a landing zone the Fed would likely describe as “broadly neutral.” “In any case, while the Fed remains on hold, we believe this could be a good opportunity for investors to lock in relatively high yields in fixed income while they are still available,” concludes Bradley.

AI Washing: The New Concern for Institutional Investors and Wealth Managers

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A new global study by Robocap, a fund manager and investor specializing in robotics, automation, and artificial intelligence (AI) equities since 2016, reveals that 37% of pension funds, insurance asset managers, family offices, and wealth managers—with a combined total of $1.183 trillion in assets under management—are very concerned about false claims made by some companies regarding their use of artificial intelligence and its purported positive impact on operations. An additional 63% expressed moderate concern about this issue.

Based on their experience, Robocap identifies “different types of AI washing.” This may include companies that claim to use AI when they are in fact relying on less sophisticated algorithms. It may also involve overstating the effectiveness of their AI compared to existing techniques or falsely asserting that their AI solutions are fully operational.

Looking ahead, 26% of the professional investors surveyed believe AI washing will worsen slightly over the next three years, while 3% expect it to worsen considerably. However, nearly two-thirds believe the issue will diminish, and 7% think it will remain unchanged.

Robocap is a thematic equity fund focused on pure-play publicly listed companies operating in the global robotics, automation, and artificial intelligence space. This fast-growing theme includes AI-powered cybersecurity, AI software, general automation, industrial robotics, healthcare robotics, drones, autonomous vehicles, key components, semiconductor automation, space robotics, logistics automation, and a wide range of AI applications throughout the entire value chain.

Robocap’s pure-play approach means it invests only in companies where at least 40% of revenues are related to robotics, automation, and AI. Currently, 85% of the portfolio’s revenues are directly tied to this theme. The fund manager is supported by a team of experienced investors and an advisory board of leading technology experts and entrepreneurs who help guide investment decisions.

The Robocap UCITS Fund, launched in January 2016 and managed by a specialized team based in London, aims for a 12% annual return over an economic cycle. It has achieved a net annualized return (CAGR) of 11.84% and a net return of 181% since inception.

Following the release of the study, Jonathan Cohen, founder and Chief Investment Officer (CIO) of Robocap, stated:
“Much like greenwashing, AI washing is a real issue for investors seeking exposure to companies that truly benefit from the growth and operational efficiencies AI can offer. We believe there is a significant misunderstanding and misuse of the term ‘AI,’ as well as a wide gap between technological innovation and the actual revenue derived from it. When selecting investment opportunities, we look for companies with solid underlying exposure to the AI, robotics, and automation theme, a strong business model supported by excellent technology, a good management team, and attractive valuation.”

Israel-Iran Conflict and the Oil Risk: Economic and Geopolitical Impacts

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The escalating conflict between Israel and Iran has significant implications for the global oil market. Although Israeli attacks have so far mainly targeted military facilities and nuclear infrastructure, any expansion of the conflict into oil-producing areas—particularly if it affects Iraqi output—could remove around 5 million barrels per day from the market.

This would represent a critical reduction, considering that the spare capacity of OPEC+Russia, estimated at about 7.5 million barrels per day, would shrink by nearly 70%.

Such a scenario greatly increases the risk of a major global supply shock, potentially pushing oil prices back toward the psychologically significant $100 per barrel level.

Political Strategies and Likely Scenarios

While the most plausible scenario is that Iran will seek to preserve what remains of its nuclear capabilities and eventually return to negotiations with the United States, the current U.S. administration under Trump—marked by relative passivity and permissiveness toward Israel—creates the possibility of an intensification of the conflict.

Israel might view Iran’s current weakness—resulting from the damage inflicted on key allies such as Hamas, Hezbollah, and Assad’s former regime in Syria—as a unique opportunity to permanently neutralize the Iranian nuclear threat.

Some political analysts even suggest that Trump may have deliberately enabled this scenario in an effort to force a definitive resolution of the Iranian nuclear issue. However, an extreme escalation would inevitably provoke retaliation from Iran, especially if the survival of Ayatollah Ali Khamenei’s regime is perceived to be at stake.

A possible Iranian response could include attacks on Saudi oil facilities or a blockade of the strategic Strait of Hormuz, through which between 18 and 20 million barrels of crude oil and refined products transit daily. Such a situation would likely force the U.S. to reconsider its strategy, balancing the goal of eliminating the nuclear threat with maintaining a degree of regional stability under the current Iranian regime.

Economic and Financial Consequences

A severe oil supply shock would significantly increase global energy costs and slow down global economic growth. The impact would be particularly acute for economies heavily reliant on imported oil, such as Europe and China. A slowdown in China would be especially concerning given its central role in the current global economic context and its strategic interest in preventing further Middle Eastern tensions.

The United States, on the other hand, would be in a relatively more favorable position thanks to the energy independence it has achieved over the past decade. Nevertheless, it would not be immune to the secondary effects of a deep global slowdown. In this context, the perception of the U.S. dollar as a safe-haven asset could be strengthened, relatively favoring dollar-denominated assets—especially Treasury bonds and U.S. equities—compared to more vulnerable regions.

Market Reaction and Perception

In recent days, market risk indicators seem to have priced in the peak of the conflict, as reflected in relatively restrained movements across key assets. U.S. Treasury yields have risen slightly, while the dollar and gold have shown downward trends. Meanwhile, stock indexes have maintained surprising stability, seemingly downplaying the severity of potential risks.

This apparent calm could be supported by the reduced intensity of oil usage in global production compared to previous decades and the belief that the remaining spare capacity, although limited, could partially offset a temporary supply disruption from Iran and Iraq.

Complacency Risks in the Markets

However, the current stability may be overlooking critical factors. A sustained disruption of supply from the Middle East would be difficult to manage without causing significant price tensions, given the limited real spare capacity of OPEC+Russia in a prolonged conflict scenario.

Moreover, a genuine escalation could trigger important second-round effects, such as significant inflationary pressures that would force central banks to maintain restrictive monetary policies for a longer period, further slowing global economic activity.

Conclusion and Outlook

The Israel-Iran conflict has the potential to trigger a major global economic shock, the exact impact of which will largely depend on the duration and depth of the conflict, as well as the response capacity of key players in the international energy market.

The prevailing uncertainty requires close monitoring of developments in the Middle East. The complacency seen in the markets so far could be quickly reversed if tensions escalate further, once again highlighting the region’s critical importance to global economic stability.

For investors, maintaining defensive and diversified positions—especially in safe-haven assets—may be a prudent strategy while the evolution of the conflict and its geopolitical and economic implications become clearer.

Gold as a Strategic Asset

In this context, gold is an attractive asset. Despite its strong performance since 2023, our valuation model shows a slight deviation from its theoretical price.

 

Since the beginning of the Russia-Ukraine war in 2023, gold has become a strategic asset. Since then, countries like Russia, Turkey, India, and China have increased the gold holdings in their reserves, diversifying away from the U.S. dollar.

The percentage of international reserves invested in gold has risen from 20% to 24%, and it continues to grow. The potential for gold to remain a structural source of demand is clear when considering differences in country-level positioning. China, for example, has only invested 7% of its total foreign currency deposits in gold, meaning its purchases could support gold prices. Additionally, it’s worth noting that approximately 60% of gold demand comes from central banks and financial investments, and the appetite of central banks for this commodity is relatively insensitive to price fluctuations, as they do not seek economic returns.

Open Outlook for Rate Cuts

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Photo courtesyJerome Powell, presidente de la Fed.

At its June meeting, the Fed kept interest rates unchanged—for the fourth time—and acknowledged that uncertainty has declined, although it still sees it as “elevated.” According to global asset managers, while the Fed’s actions were in line with expectations, its updated economic projections leave the door open for two rate cuts before the end of the year.

The case for placing two rate cuts on the radar is based on the Fed recognizing that economic uncertainty has “eased,” which could pave the way for rate cuts if inflation remains under control. “A more relaxed stance on economic uncertainty could signal greater openness to rate cuts in the second half of the year, as long as other macroeconomic indicators remain stable,” says Bret Kenwell, an analyst at eToro in the U.S.

“Powell emphasized the role of impending tariff hikes in worsening economic prospects and the importance of the Fed not acting prematurely before the full effects of trade policy are understood—in a meeting that was otherwise uneventful. However, for a growing number of members, ‘waiting’ now implies not cutting rates at all this year. Somewhat surprisingly—given the potentially negative long-term impact of tariffs on growth and employment—the Fed has revised down its forecast for rate cuts in 2026 from two to one,” adds Paolo Zanghieri, Senior Economist at Generali AM (part of Generali Investments).

Cuts in 2025?

Ray Sharma-Ong, Head of Multi-Asset Investment Solutions – Southeast Asia at abrdn Investments, points out that the dot plot from Federal Open Market Committee (FOMC) members still projects two rate cuts for 2025. However, he notes that projections for 2026 and 2027 have been revised, and only one cut is expected in each of those years. Moreover, Sharma-Ong believes that given current uncertainty around economic outlook and trade policy, the Fed might ultimately implement only one—or even no—cut this year, contrary to the two cuts indicated in the dot plot for 2025.

“This is due to a lack of clarity about the final form of tariffs, the evolution of tariff pauses, and trade negotiations. These developments remain uncertain and will impact economic, inflationary, monetary, and market sentiment outcomes,” notes the abrdn expert.

Simon Dangoor, Head of Fixed Income Macro Strategies at Goldman Sachs Asset Management, explains that FOMC members continue to expect short-term inflation to be largely transitory, and their tolerance for rising unemployment remains low. As a result, he states: “We expect the Fed to hold its stance at next month’s meeting, but believe a path could open up for the Fed to resume its easing cycle later this year if the labor market weakens.”

Dan Siluk, Global Head of Short Duration & Liquidity and Portfolio Manager at Janus Henderson, believes this moderate decision by the Fed indeed leaves the door open for rate cuts in the second half of 2025. “The Fed is clearly signaling it’s in no rush but is prepared to act if inflation continues to moderate and labor market weakness deepens. The upward revision in inflation forecasts may temper expectations for aggressive easing, but maintaining the rate path for 2025 reassures markets that the Fed remains flexible,” he explains.

He also adds that “markets will now look to Powell’s Q&A for greater clarity on the Fed’s reaction function, particularly how it weighs recent moderate inflation data against persistent geopolitical and tariff-related risks.”

Doubts Remain

However, other investment firms are less confident about future rate cuts. “We believe the Fed will remain on hold with no interest rate changes this year, but we foresee gradual rate cuts next year under the leadership of a new Chair.

The conflicting risks to growth and inflation make keeping rates steady the logical choice for the Fed this year. The August review of monetary policy could lead to some changes in the Fed’s operations, but we believe the impact will be limited. The appointment of Powell’s successor will carry greater importance. Under new leadership, we think the committee will use next year’s inflation moderation as an opportunity to start moving toward a more neutral policy,” says George Brown, Senior Economist at Schroders.

This view is echoed by Raphael Olszyna-Marzys, International Economist at J. Safra Sarasin Sustainable AM, who believes Powell’s repeated assertion that the economy remains strong carries significant weight, despite the uncertainty and tariff impact. “As Jerome Powell stated, ultimately the cost of tariffs must be paid, and some of it will fall on the end consumer. We know that’s coming, and we want to see these effects before making premature judgments. This implies it is unlikely the Fed will resume its rate-cutting cycle—unless the labor market suddenly weakens—at least until September,” notes Olszyna-Marzys.

Key Decision Drivers

Allison Boxer, Economist at PIMCO, highlights that revisions in the Fed’s economic projections point to a more uncertain outlook. “Fed officials made stagflationary revisions to their forecasts, with median forecasts for both inflation and unemployment rising, while growth projections fell. Their outlook implies that both sides of the Fed’s dual mandate—price stability and maximum employment—are moving in the wrong direction. Given this contradiction, the projections showed Fed officials split on rate outlooks, with most divided between holding rates steady or cutting by 50 basis points by year-end,” Boxer explains.

PIMCO’s view also sees diverging paths for the Fed: cutting gradually or minimally if the labor market proves resilient, and cutting more significantly if labor weakens. “Given recent labor data and rising uncertainty, our base case is for a return to a gradual rate-cutting pace later this year,” adds the economist.

Jean Boivin, Head of the BlackRock Investment Institute, explains that the Fed has long faced a delicate balancing act between supporting growth and containing inflation. “Powell stated that he expected tariffs to generate significant inflation in the coming months. And although the Fed’s base case seems to be that tariffs will have a one-off inflationary impact rather than a lasting one, it is clearly acknowledging the potential for more persistent inflation, depending on the size and duration of tariffs. It has slightly revised its inflation forecast upward for the coming years. Still, we believe the Fed is underestimating the magnitude of future inflationary pressures,” says Boivin.

Another factor some firms believe could come into play is the leadership change at the Fed, with Powell having 11 months left in his term. “Looking ahead to 2026, we expect leadership changes at the Federal Reserve to further shift the policy landscape. Jerome Powell’s term ends on May 15, 2026, and a new chair is expected to be appointed. Potential successors—such as Kevin Hassett, Kevin Warsh, and Scott Bessent—are viewed as more moderate and aligned with President Trump’s pro-growth, low-rate agenda. Moreover, four of the twelve voting FOMC members will also rotate next year. This shift could support the economy ahead of the midterm elections scheduled for November 3, 2026. Consequently, we expect the Fed’s projected rate cuts for 2026 and 2027 to evolve as we approach 2026,” says Sharma-Ong.