Carregosa: “The disinflation process is proceeding smoothly in both the eurozone and the US”

The global economic and political landscape is changing rapidly, marked by a broad reorganization of trade relations and political alliances worldwide. In response, uncertainty indicators in global markets soared in the first half of 2025. But in recent weeks, we've seen a cycle of optimism, driven by the easing of trade tensions between the United States (US) and China, the ongoing war, and some better-than-expected macroeconomic data, according to analysts at Banco Carregosa.

Global growth projections for 2025 and 2026 stand at 2.60% and 2.80%, revised downward from 3.0% at the beginning of the year. Analysts reflected in their projections concerns about the impact of uncertain US policy on that region. Projections have stabilized somewhat, with concerns regarding the final outcome of the negotiation process for US bilateral trade agreements with each of its trading partners reversing.

Mário Carvalho Fernandes explained that "since Trump's election, business sentiment indices have revealed a softer growth outlook." However, "reality has revealed an increase in surprises; in other words, reality has turned out to be more positive than business owners feared."

Among US President Donald Trump's objectives with the trade war is the devaluation of the dollar to increase US exports and reduce the country's debt. It should be noted that the dollar is still the reserve currency, that is, the currency used in large quantities by many governments and institutions.

Markets continue to price in two Fed rate cuts by the end of the year, less than before, which could support the US currency.

The Chief Investment Officer explained that the market perceived Donald Trump to be taking extreme positions to anchor a negotiating position.

Carregosa also highlighted the 2026 election of the new chairman of the U.S. Federal Reserve (Fed), which could alter monetary policy in that country. Experts consider the possibility of an ultra- dovish chairman a risk.

"The disinflation process is proceeding smoothly in both the Eurozone and the US," revealed Banco Carregosa managers. "Even the less volatile components of core inflation (excluding food and energy) are approaching central banks' targets. However, the expectation of a rising cost of living resulting from the imposition of tariffs on Liberation Day has contributed to heightened fears among US consumers and some Federal Reserve governors. The reality should prove more benign, allowing for a recovery in consumption and a less restrictive monetary policy," they argue.

Risks are beginning to loom on the horizon. Macroeconomic adjustments, in particular, could trigger new and unexpected stress outbreaks. A more severe-than-expected recession could introduce market stress. Also on the list of threats is an increase in insolvencies.

On the other hand, the return of inflation (MAGA, tariffs and deglobalization; effects of wars; extreme weather events) is also a risk.

The list of alerts also includes the risk of a crisis in Real Estate (Residential or Commercial).

Also the geopolitical risk with possible contagion and expansion of armed conflicts, and the emergence of a new world order.

The list of threats includes what Carregosa analysts call “US/China Excessive Debt Digestion .”

Opportunities include economies in equilibrium and a new generation of investors who could ignite a stock market meltup .

In the bond market, Carregosa argues that the reduction in central banks' balance sheets should reduce credit support, but the economic growth cycle and the reduction in interest rates reduce the likelihood of insolvencies.

In the stock market, they highlight the expectation of a no-landing in the US economy and the support of monetary policy as positive points.

“The second quarter is expected to mark the lowest earnings growth of the year, due to comparisons more difficult, weakness in sectors such as energy and the initial impact of the introduction of tariffs,” says Pedro Baldaia.

“The pattern of downgrades in 2025 has been similar to the historical one,” highlights the stock expert.

The US market is more closed, so the weight of revenue generated domestically is much greater than that of Europe, explains Carregosa.

"The appreciation of the euro has a more negative effect on European exporters, in terms of potential downgrades , than a similar movement would have on the dollar, leading to outperformance for companies with local exposure. Downgrades were stronger in Europe than in the US," he argues.

The sectors potentially most negatively impacted by the appreciation of the euro include Luxury Goods and Technology.

“The pace of growth is expected to accelerate in the second half of the year and especially in 2026. The numbers remain healthy and this contributes to market optimism.”

In an analysis of the multiples at which the market trades, Pedro Baldaia says that "the market continues to trade at historically high levels, especially when we take into account the current level of interest rates."

"Interestingly, Europe, after its YTD appreciation (from January 1st to today), is now trading above its historical average. From a sectoral perspective, we find several sectors with historically high valuations , such as Technology + Consumer; Discretionary + Industrials, with Healthcare and Real Estate standing out for their attractive valuations in historical terms," ​​he adds.

Positioning for the next three months in the stock market

Carregosa predicts markets will once again reach highs and with high valuations, and "although earnings growth is still healthy, we are adopting an optimistic but somewhat more cautious stance, incorporating the risk of negative surprises in economic growth and inflation, especially in the context of the introduction of trade tariffs in the US and exchange rate volatility."

"We consider it appropriate to invest both in the US, for growth and innovation, and in Europe, for value and restructuring" and "we recommend prioritizing a balance between less cyclical sectors and structural growth."

"Lower volatility in earnings should continue to be favored, and therefore investment in quality companies, typically large-cap companies, characterized by exposure to long-term structural growth trends and excellent cash flow generation, should be prioritized," adds Carregosa.

When it comes to alternative investments, analysts argue that they will tend to have a lower opportunity cost as interest rates fall across the entire yield curve, they argue.

On the other hand, they argue that the “de-dollarization” of the global economy can support the price of gold.

As for gold, Carregosa argues that reducing the real interest rate reduces the opportunity cost of holding it. of precious metals.

Filipe Silva anticipates another ECB interest rate cut in September

Inflation is within the European Central Bank's (ECB) target and should stabilize around 2%, which Lagarde referred to in Sintra as “ target reached ” but not as “ mission accomplished ”.

Therefore, the ECB says it is prepared and well-positioned to deal with exceptional uncertainty if tensions in the Middle East escalate.

Therefore, "we shouldn't see any further interest rate cuts in July," argues Filipe Silva. But in September, we should see another 25 basis point cut.