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What happened in the last month?
In focus: rising inflation, rising stock markets
In the United States, which exerts a decisive influence on global financial and capital markets, the question is no longer simply whether consumer prices will continue to rise. Rather, it is whether they are rising fast enough to make interest rate cuts seem even more unrealistic, or, worse still, to open the door once again to interest rate hikes. The latest figures did little to reassure anyone: the U.S. annual inflation rate accelerated to 3.8% in April, the highest level since May 2023. This is a significant increase from March’s 3.3%, and even exceeds the 3.7% forecasts. The oil crisis triggered by the war in Iran continues to drive prices higher: energy prices jumped 17.9%, marking the largest annual increase since September 2022. Gasoline prices rose by 28.4% and heating oil by 54.3%, but housing and food prices are also rising at an accelerating pace. The rise in gasoline prices, and the resulting limited decline in demand, increases the risk that the inflationary surge could become more persistent: indirect price hikes linked to higher energy costs will become easier to implement. The core inflation rate, which excludes food and energy, rose by 3.2% compared to a year earlier, well above the Fed’s 2% target.
Equity market news
The rise in the U.S. stock market, driven entirely by growing corporate profits, appears unstoppable. According to forecasts, the S&P 500 index, which started the summer at 7,500 points, is expected to rise to 8,000 by the end of the year. This higher-than-previous forecast is driven by updated earnings estimates; according to a forecast by the renowned U.S. investment bank Goldman Sachs, the average earnings per share (EPS) of companies in the S&P 500 could reach $340 by the end of 2026, representing a 24% increase compared to the previous year. Next year’s forecasts go even further: an average EPS of $385 in 2027 represents a further 13% increase. The biggest driver is spending on artificial intelligence infrastructure: the largest tech companies are expected to spend $754 billion on capital investments this year (an 83% jump compared to 2025) and $905 billion in 2027. Companies benefiting from AI infrastructure investments are expected to account for roughly half of the S&P 500 index’s EPS growth this year. The rise in technology stock prices is also remarkable in Europe and Asia: Samsung’s share price has risen by 50% in just one month.
Bond market news
The U.S. bond market is already pricing in rising inflation and, with it, the expectation that borrowing costs will remain high. The yield on 30-year U.S. Treasury bonds briefly reached 5.20%, the highest level since 2007, but some analysts believe it could rise as high as 6%. But the annual yield on 10-year Treasury bonds was also over 4.5%, investors were clearly demanding higher compensation due to inflation risk and America’s growing debt burden. With the rise in long-term yields, investors are now betting that inflation and interest rates on government borrowing will remain stubbornly high. Before the Iran conflict, markets had expected two or three Fed rate cuts this year; now they are more likely to anticipate a rate hike in December.
The situation is similar in Europe, which relies heavily on energy imports: in Germany, which is grappling with high inflation, the yield on 10-year government bonds has hit a 15-year high of over 3%, while in Japan, the rate exceeding 2.6% is a historic record. Hungary, however, is an exception: yields have fallen from 7.5% to 5.5% in two months due to a pro-EU political shift and the inflow of EU funds.
Alternative investments news
The commodities sector generally performs well during periods of stagflation (when high inflation and weaker economic growth occur simultaneously); moreover, oil prices remain high due to the U.S.-Iran conflict, particularly the closure of the Strait of Hormuz, through which a quarter of global oil exports pass. However, the high price level of around $100 per barrel (1 barrel = 159 liters) resulting from the crisis could fall rapidly if the Strait of Hormuz becomes navigable again. Gold, however, which has become overbought and overpositioned in recent years, is struggling: the global market price of the precious metal, typically viewed as a safe haven throughout history, fell amid the risk-averse environment surrounding the Iran conflict, so it has not fulfilled this role at present. The price of $4,500 per ounce (1 ounce = 31.1 grams) is 20 percent lower than the record high set at the end of January.
What can we expect in the coming period?
Investment clock
The VIG Global Investment Clock, a scientifically based tool that uses indicators to forecast economic cycles, is currently poised on the cusp between stagflation (weak growth coupled with high inflation) and expansion.
The crisis in the Middle East has been shaping market sentiment since February. The stock market price of oil continues to hover around $100 per barrel, which has once again fueled inflation fears worldwide. In the United States, April inflation data already reflected higher energy prices, with the headline rate rising to 3.8%. Due to the oil shock triggered by the conflict in Iran, energy costs rose by nearly 18% year-over-year. But even core inflation, calculated without accounting for rapidly changing short-term components such as household energy, vehicle fuels, Medicare-covered drugs, and government-priced services, jumped to 2.7%.
The U.S. labor market remains resilient, but consumers’ assessment of the labor market remains pessimistic. Growth forecasts are declining, and higher oil prices are negatively impacting both industrial and retail sales.
In the eurozone, the average rate of consumer price inflation rose to 3.2% in May, the highest level since the fall of 2023. The main driver was the rise in energy costs, which increased by 10.9% overall compared to the same period last year.
In China, however, deflation (a sustained decline in the general price level) appears to have come to an end: both the consumer price index (1.2% in April) and the producer price index (2.8%) have begun to rise. At the same time, the protracted conflict in the Middle East is increasing the risk of stagflation.
Tactical Asset Allocation
In line with the latest economic and capital market trends, we have made adjustments to our asset allocation. We have once again adopted a slightly riskier asset allocation for the coming period, increasing the weighting of certain equity markets primarily due to the positive outlook for the stock market.
We have slightly increased our overweight position in the stock markets of the most developed countries. The corporate earnings season in the U.S. has been very strong. Upward revisions to EPS have accelerated, suggesting that average earnings per share could rise by 22% year-over-year. This marks the sixth consecutive quarter of double-digit EPS growth. While Wall Street and the technology sector remain investors’ favorites, the latter, however, has significant players in the Netherlands (the share price of ASML, a chip manufacturing company, has risen nearly 50% since the start of the year) and Finland as well (NOKIA has risen 150% as investors in the telecommunications sector also anticipate the expansion of AI infrastructure, which in turn increases demand for Nokia’s network equipment). Meanwhile, stock markets in southern EU member states, Spain and Italy, are also being supported by stronger earnings revisions and an economic upswing.
Gold has not performed well even during this period of risk aversion, and further declines in its price are expected, so it may be worth reducing your exposure to this precious metal. Many believe that the weakness of gold, which has risen too much in recent years, is reinforced by several factors: since it is priced globally in dollars, the appreciation of the U.S. currency makes the precious metal more expensive for buyers using other currencies, which curbs demand. Moreover, gold is an investment that pays no interest or dividends. Now, as bond yields rise, investors are favoring interest-bearing assets, reducing the appeal of gold.
Source: VIG Asset Management
The weights indicate the evaluation of the respective country, region, and asset class, providing a basis for portfolio managers in structuring portfolios and establishing positions, thus helping to capitalize on market opportunities.
Weights:
- Strongly underweight
- Underweight
- Slightly underweight
- Neutral
- Slightly overweight
- Overweight
- Strongly overweight
Changes – change compare to the the previous month
The table was prepared based on our investment clock and quadrant modell**.
Focus fund: VIG Emerging Market ESG Equity Investment Fund
An equity fund investing in emerging market stocks could perform well in the coming months. According to reasonable expectations, the war in Iran will eventually come to an end, to which emerging market stocks could react positively overall. During times of war, investors often flee to the dollar, U.S. Treasuries, and gold. The end of the conflict could reduce this demand for “safe havens,” making riskier assets, including emerging market stocks, more attractive. Significant capital inflows, in turn, drive up the prices of these stock markets. Moreover, emerging market stocks are attractively valued: their average P/E ratio is just over 12 times, while corporate earnings growth is above average. (On the U.S. stock market, for example, this same ratio is over 21, meaning stocks there are significantly more expensive.) Since the VIG Emerging Markets ESG Equity Fund invests in the shares of companies benefiting from the growth of developing economies and profits from their rising share prices or dividend payments, it could be a fruitful investment target for risk-takers in the coming months.
Based on our expectations (based on tactical asset allocation), the fund of the month may outperform in the near future.
VIG Emerging Market ESG Equity Investment Fund
ESG theme of the month: Investments and the “pink tax”
During an average trip to a drugstore, it is highly likely that we come across products marketed to men alongside their female counterparts, featuring virtually identical ingredients but different packaging – and often priced 10-15% higher.
Similar examples can also be found in the service sector; hair salons are a classic case. This market phenomenon is commonly referred to as the “pink tax.” Despite its name, it is not an actual government-imposed tax but rather a form of price differentiation applied by manufacturers and service providers themselves.
At first glance, this may appear to be a traditional consumer protection issue. However, it is also a relevant topic for investment managers, as it touches on several pillars of ESG (Environmental, Social, and Governance) considerations.
Marketing strategy or profit maximization?
To better understand the phenomenon, it is worth examining how such an unofficial form of “taxation” can exist in practice. Companies traditionally justify the higher prices of products targeted at women by citing increased design costs, more sophisticated packaging, or the expenses associated with targeted marketing campaigns. Another common argument is that female consumers exhibit different levels of price elasticity.
However, research conducted by the University of California, Berkeley found that women are, on average, 15% more price-sensitive than men. In the beauty and personal care sector, this difference can reach as much as 30%.
Asset management companies and the pink tax
According to a 2025 analysis by BSI Economics, the pink tax costs women in the United States approximately USD 1,300 in additional annual expenses. Furthermore, during periods of inflation, products typically included in women’s consumer baskets tend to experience faster and more pronounced price increases than those primarily consumed by men.
When manufacturers and retailers maintain unjustifiably higher prices for products and services targeted at women, they effectively reduce the disposable income available to this consumer segment. This can dampen consumption, which may ultimately weaken economic growth and, indirectly, reduce households’ willingness and ability to invest.
Within the ESG framework, the S (Social) pillar encompasses issues such as gender equality and consumer protection. From this perspective, the pink tax is not merely an isolated marketing practice but rather a systemic inequality that may contribute to widening social disparities between men and women.
The issue becomes even more complex when considering the G (Governance) pillar of ESG. Artificially inflating the prices of functionally equivalent products without objective production-cost justification may expose companies to ethical, consumer protection, and reputational risks.
As an asset management company, one of the most meaningful ways we can contribute to a better future is by identifying investment opportunities that promote sustainability. Therefore, when managing our clients’ assets, we strive to consider not only financial returns but also the broader social and environmental impacts of our investment decisions.
Source:
https://bsi-economics.org/understanding-the-pink-tax-and-pinkflation-note/
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The Asset Management’s license number for managing alternative investment funds (AIFM) is: H-EN-III-6/2015. The Fund Manager’s license number for UCITS fund management (collective portfolio management) is: H-EN-III-101/2016.