What are the structural differences between U.S. and European equities, both in the short and somewhat longer term? And how does the strategic and tactical choice between the two affect your returns? Mark Van Assche, Private Banking and Wealth Office account manager, talks about it with Baptiste Mesot, Portfolio Manager at KBC Asset Management.

• Inflation is still on a downward trend in both the US and Europe.
• However, stubborn underlying inflation (especially in the services sector) and oil prices that have recently risen again are slowing down the disinflation process slightly more than originally thought. 
• In the meantime, we still see inflation figures that continue to surprise, particularly in the US.

• The exceptional stimulus programmes are being scaled back, but there is no sign of savings drift. Programmes such as EU Next Generation and the Inflation Reduction Act in the US are still substantial and continue to offer considerable support. China is also stimulating its flagging economy. 
• Central banks in the US and Europe raised key rates at an unprecedented pace in an effort to slow growth and cool inflation. 
• In their recent communications, the banks confirm that the disinflation process is still on track but that corroboration is needed before key rates are cut. 
• The market is pinning its hopes on an initial ECB rate cut in June, but is unsure about the timing in the US.

• Interest rates appear to have peaked. 
• However, a range of inflation data (especially in the US) and higher oil prices cast doubt on the timing and magnitude of the expected cut in policy rates. As a result, we still see interest rates making occasional bucks.

• After a strong rally at the start of the year, the markets seem to be consolidating somewhat. 
• Higher interest rates and expensive valuations weigh on sentiment somewhat, but fundamentals remain strong. 
• Profit expectations for the second half of the year may be a bit on the high side, but the bar is not too high for the current reporting season. In the US, earnings growth of around 4% is expected, while for Europe, earnings contraction of just under 15% is expected.
•  The figures that have already been published seem to exceed expectations.

• Oil prices have risen sharply since the beginning of the year. This is fuelling the current prevailing expectation of lower inflation. 
• However, the conflict in the Middle East and Ukraine could continue to cause nervousness. 
• Not an easy environment, therefore, for policymakers to take decisions on interest rates. 
• The US elections could also give rise to volatility later this year.

Our latest insights into various investment topics are given below. Use them to your benefit.