Fuxing Bank continues to bet on policy-driven growth: shifting from bonds and cash withdrawal to stocks and commodities offensive.

According to the latest multi-asset outlook report released by the chief US stock strategist of the European financial giant French Industrial Bank (also known as Socit Gnrale, or "French Bank"), a global economic growth trend driven by government spending and large-scale AI investments by corporations may continue to maintain strong and resilient growth, despite facing the tightening threat of monetary policy. This has prompted French Industrial Bank to significantly increase its allocation to stocks and commodities assets, while reducing its exposure to bonds and cash assets. Manish Kabra, the chief US stock strategist of French Industrial Bank, stated in a report to clients on June 18 that the financial giant's core investment thesis remains unchanged: the resilience-driven economic growth cycle led by sovereign policies and AI-related capital expenditures will not be disrupted by the monetary policy paths of global central banks such as the Federal Reserve and the European Central Bank. Therefore, French Industrial Bank has raised its recommended stock asset allocation from 50% to 55% and increased its commodity asset allocation from 15% to 20%. The bank correspondingly reduced its allocation to fixed income assets such as government bonds and cash. When combining French Bank's multi-asset allocation views with the "less-talk Fed" reform framework led by the new Fed chief Powell, the conclusion may not be as pessimistic as some strategists expect that "Powell reducing forward guidance language will inevitably end the bull market". Instead, the economic growth cycle may still outperform central bank tightening impacts, with global asset pricing entering a stage of higher volatility and differentiation. Several media outlets have recently reported information from insiders, suggesting that Powell may transition the Federal Reserve from the strong forward guidance framework of the Powell era to a more data-dependent, less commitment-oriented and market-tolerant reverse guidance central bank. Since the beginning of this year, Powell himself has openly opposed dot plots and forward guidance pathways multiple times, signaling that the dot plot, as an important communication tool between the Federal Reserve and the market, might become a relic of the past during Powell's tenure. Powell has stated that he hopes to stop providing investors with "feed-me style" forecasts. If the dot plot is discontinued and the loose/tight bias in statements is removed, the market will lose an important interest rate path anchor, policy uncertainty and 10-year Treasury bond yield volatility are likely to increase, and the yield trend will heavily lean towards an uptrend. Manish Kabra from French Bank clearly states that the growth cycle driven by sovereign fiscal policies and capital expenditures will not be interrupted by central banks, so they have increased their stock allocation from 50% to 55% and their commodity allocation from 15% to 20%, while reducing fixed income and cash allocations. This is not contradictory to the "higher bond yields, higher volatility" coming from Powell's reform framework, but rather points towards a common investment implication: in an environment where fiscal spending, industrial policies, and AI-related infrastructure capital expenditures remain strong, long-term bonds and cash are no longer the optimal defenses, and stocks, commodities, banks, industries, gold, AI computing power, and cyclical assets related to capital expenditures may continue to outperform traditional defensive assets. The anticipation of central bank tightening cannot stop fiscal stimulus and capital expenditure cycles, French Bank advises increasing holdings of stocks and commodities Kabra's latest outlook reflects his confidence in growth: even if policymakers maintain relatively restrictive interest rate settings and forward-looking monetary policy frameworks, government spending measures, industrial policy projects, and the continued scale of corporate AI investments will continue to support economic activity. This viewpoint is in stark contrast to recurring market concerns, namely that high borrowing costs for businesses may eventually stifle growth and lead to more pronounced slowdown. Instead, French Industrial Bank believes that global fiscal policies and capital investment trends have enough momentum to support their overweight risk positions in various asset classes. In terms of expected stock allocations, the bank has increased its exposure to the US, Japan, and the UK. In emerging markets, French Industrial Bank has significantly increased its exposure to Chinese assets, while lowering its broader emerging market allocation, indicating a preference for targeted country allocations rather than a blanket bet on developing economies. This significant adjustment from French Bank comes at a time when investors are still debating whether recent policy support measures in China and efforts to stabilize economic resilience can stronger corporate profits and outperformance in the stock market. Kabra also highlighted several "catch-up" trading themes that he believes may outperform if the bank's broader global economic outlook is correct. In terms of stock allocations, he specifically mentioned US bank stocks; despite improving profit prospects and favorable regulatory environments, this sector still lags behind other areas in the broader market. Additionally, in commodities, French Industrial Bank singled out gold; gold has seen strong gains in recent years, but may continue to benefit from continued strong central bank gold purchases, geopolitical uncertainties, ongoing expansion of sovereign debts in Western countries, and growing investor interest in portfolio hedging tools. In the foreign exchange market, Kabra from French Bank recommends shorting the euro against several commodities-related currencies, including the Norwegian krone, Canadian dollar, Australian dollar, New Zealand dollar, and Brazilian real. The institution also favors shorting the euro against the Indian rupee position, reflecting its future expectations: in the current macroeconomic environment, economies more closely linked to commodities production and resource exports may outperform the entire European market. French Industrial Bank's research report essentially places a vote of confidence in the persistency of the current economic expansion. While recession concerns and expectations of central bank tightening policies remain key risks, French Bank believes that government spending and the massive AI investments in the private sector are creating a unique resilient growth backdrop, making stocks, commodities, and cyclical sectors more attractive than defensive assets such as bonds and cash. The latest data from Wall Street financial giant Goldman Sachs shows that the global AI capital expenditure benchmark model is expected to increase from $765 billion per year in 2026 to $1.6 trillion per year in 2031, with cumulative capital expenditures estimated to be around $7.6 trillion from 2026 to 2031. The power demand of US data centers is expected to increase from 31GW in 2025 to 66GW in 2027, directly leading to spill-over investments in AI computing infrastructure into server CPUs, DRAM/NAND/HBM, advanced packaging, liquid cooling, power equipment, transformers, gas turbines, grid equipment, data center REITs, and engineering construction. Powell rewriting the bond market script, capital expenditure cycle supporting the new theme of risk assets Therefore, as French Bank's preference for risk assets such as stocks and commodities indicates, in an environment where fiscal spending, industrial policies, and AI-related infrastructure capital expenditures remain strong, long-term bonds and cash are no longer the optimal defense, and stocks, commodities, banks, industries, gold, and cyclical assets related to capital expenditures may continue to outperform traditional defensive assets. Under Powell's reform framework, the "less-talk Fed" essentially signifies not just a change in communication style, but a systematic contraction of the framework of the past decade where central banks managed expectations through forward guidance, dot plots, and market management. Last week, after Powell chaired his first FOMC monetary policy meeting maintaining the interest rate unchanged, he removed policy directional language, refused to submit his own dot plot, and pushed for a review that may weaken or even eliminate dot plots and forward guidance tools. The market generally interprets Powell's views and stance as the Fed reducing "policy spoilers" for investors, requiring the market to re-price inflation and interest rate pathways on their own. The direct result is not an immediate rate hike, but increased uncertainty, interest rate volatility, term premiums, and event risk premiums, which will lead to a "quasi-tightening" monetary policy effect through higher US Treasury yields, more expensive financing costs, and more cautious risk appetite. The bond market has already been pre-enacting the changes to the framework led by Powell: the 10-year US Treasury yield has risen by approximately 50 basis points since the outbreak of the Iran conflict, and the 2-year US Treasury yield has reached 4.22%, a high point in over a year. In addition, nine Federal Reserve officials in the latest FOMC dot plot project the possibility of an interest rate hike in 2026, while Powell himself did not submit a prediction. The core logic of Powell's leadership in reducing forward guidance and dot plot frequency under the less-talk Fed framework is that reduced transparency will force investors to pay higher insurance premiums for "unexpected Fed actions", making short-term rate trading and macro volatility trading valuable again; hedge funds welcome this environment because interest rate paths are no longer locked in advance, and whoever can more accurately judge inflation, oil prices, employment, and fiscal expansion can gain excess returns.