Equities and bonds cannot rally together forever - Our weekly cross-asset views

This was a short week due to Thanksgiving, but still enough to see markets swing back to a risk-on mode at a relatively good pace for another buy-the-dip episode. MSCI World is up 3% wtd (last 5 sessions up), the SPX (+3.2% wtd) has almost retraced its November loss while US Tech indices are still halfway (NDX +4%, Mag7 +4.7% wtd). US High Yield spreads are back below 280bps as the VIX dropped back to 17 (vs last week high of 28). Our Risk Perception Index is down from 47 to 33. Gold is up (3%), US small caps surge 5% and US dollar down (-0.5%) wtd as Fed rate cut expectations increased.What we called the “confusion spot” of November has faded, as markets lack clear reasons at that stage to continue to sell off after the worst risk assets drawdowns since Liberation Day. First the Fed: following last Friday’s Williams Dec. rate cut validation, the fears of a December Fed pause are mostly gone: the market now almost fully prices a 23bps cut for Dec. 10 vs less than 11bps last Thursday. Second AI, despite initial mixed reactions, Nvidia results and guidance have curbed short-term left tail risk. Third macro/micro, the reopening of US data newsflow provides no fuel to risk aversion so far with still solid September durable goods, a Beige book pointing to softening (some rise in job cuts but mostly a no-hiring no firing economy under labor force shortage); on the micro side, data support a more upbeat view with a bunch of US retailers raising their forecasts and somehow confirming the increase in the Atlanta Fed GDP tracker for Q4 (3.85%). Fourth, the UK budget verdict Thursday was good at not making things worst (£ 22Bn fiscal headroom vs 15Bn expected) although structural issues are probably not tackled, but market reaction was positive (GBP up, 30y-Gilt rates down 12bps, UK stocks up).Next week is our Global Outlook Live Webcast from Paris! Please join us as we will discuss key issues that will shape 2026: Trade War, Europe and sovereignty, Fiscal dominance, AI and the key risks