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CIO View Portfolio: Perspectives

03/12/2025

In our monthly Multi-Asset update we describe the translation of our CIO View into the CIO View model portfolio.

Vincenzo Vedda

Chief Investment Officer

Overview

Idea of the month

Sterling has regained momentum as the UK’s five-year budget plan eased concerns about the deficit and avoided harsher measures. The package combines fiscal consolidation with structural reforms, including freezing tax thresholds, introducing higher levies on dividends and property. Additional measures include new charges on electric vehicles and tighter compliance rules, signaling credible revenue generation. Although productivity remains a structural challenge, the momentum of reform and clearer fiscal policy support the UK's relative growth prospects compared to the Eurozone. Given the combination of fiscal clarity, reform bias and supportive rate expectations, we are bullish on the pound vs the euro, with a target of 0.86.

Gilts and sterling: Relief after the UK's budget plan

^{Source: Bloomberg Finance L.P., DWS Investment GmbH as of 12/1/25}

Our take on duration & risk

Risk

The economic environment is expected to improve by 2026. Central banks with supportive monetary policies and ample liquidity will continue to provide support. The three expected Fed cuts over the next 12 months, UST 10Y yields below 4.50%, and an acceleration in US growth will create a positive environment for equities. However, elevated valuations and concentrated market leadership in AI and tech could make the market vulnerable to corrections. Diversification remains highly important. Within equities, diversification across regions, sectors and styles seems sensible.

We keep our risk preference stance at +1

^{Source: DWS Investment GmbH as of 12/1/25}

Duration

Front- to mid-curve Bunds and Gilts remain our preference within our neutral stance. We keep our curve steepening bias, especially in 5s30s. We reinitiate a small tactical long bias via 2-5y Bunds. In EUR duration we see the front-end near the top of a tight range with ECB pricing slightly cheap vs Fed and inflation risk skewed as wage-driven disinflation isn’t priced into forwards. In USD duration we remain neutral with slight bias to sell 10y rallies near 4%, supported by stronger ’26 growth outlook, unattractive hedged pick-up and rising fiscal dominance reducing foreign appetite for U.S. debt.

We stick to our neutral duration stance

^{Source: DWS Investment GmbH as of 12/1/25}

Whats up in the segments?

We stick to +1 for emerging markets, confirm +1 on Healthcare and upgrade Value to +1 as well

Good earnings growth and an accelerating GDP - especially in Europe - pushed all major indices up. Three priced in rate cuts by the Fed and a better-than-expected resilient U.S. led us to our constructive view in 2026. We expect the S&P 500 to reach 7,500 by Dec ‘26, with double-digit earnings growth, led by strong performance in tech and communications sectors. We stick to our +1 for emerging markets. The relative valuation of EM vs DM remains attractive, and earnings growth for 2026/07 is superior. Europe, pressured by a lower growth profile, EUR strength and macroeconomic uncertainties, stays neutral, as well as U.S. equities and Japan. We still like Healthcare from a diversification perspective. Also Value should work as a counterbalance versus the quite expensive Tech trade. In fixed income, relatively speaking, our EUR investor preferences are structured as follows: Gilts >= Bunds >= Ts > JGB. Despite tight spreads and expensive valuations across the board, we still prefer EUR Investment Grade as fundamentals, technicals and demand remain strong. We stay +1 in EUR Investment Grade, neutral on USD Investment Grade, EUR High Yield and USD High Yield. Coming to currencies, the USD is back to neutral. The major headwinds of tariffs and MAGA uncertainty appear to have been priced in. Sentiment towards the dollar has normalized, and the focus has shifted towards fundamentals. Fewer than expected Fed cuts could even strengthen the US dollar against the euro.

Indicators point to an economic upturn in Germany

Ifo Index Manufacturing ^{Source: Bloomberg Finance L.P., DWS Investment GmbH as of 12/1/25}

Bundesbank Weekly Activity Indicator

^{Source: Bloomberg Finance L.P., DWS Investment GmbH as of 12/1/25}

CIO View Model Portfolio positioning vs. anchor

This allocation shows how we implement the above-mentioned CIO View into a Multi-Asset portfolio of liquid securities

^{This allocation may not be suitable for all investors and can be changed at any time without notice. Source: DWS Investment GmbH as of 12/1/25}
^{The anchor allocation refers to the strategic asset allocation, while the portfolio positioning refers to the tactical asset allocation. Rounded figures.}

^{1 Including equity derivatives.}

^{2 Total excluding interest rate derivatives (derivatives are included in the positioning figures at a subordinate level).}

CIO View Portfolio Perspectives

Miscellaneous Dec 2025

The worrying 'K' on the U.S. stock market

12/12/2025

The operating profits of the S&P 500 and overall economic profits are decoupling

Investment Traffic Lights

08/12/2025

The monthly Investment Traffic Lights provide a detailed market analysis and our view on developments in the main asset classes.

U.S. unemployment steady, nerves frayed

05/12/2025

A widening gap between official data and worker sentiment points to the power of technological anxiety.

CIO View

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