FICC

We present the performance review of the Global Fixed Income Strategy Model Bond Portfolio for 2023. We also discuss the outlook for 2024 performance based on our Key Views for the year. The portfolio is positioned to benefit from a year where the global backdrop will be one of weak growth and further declines in inflation, leading central bank to begin cutting interest rates.

Special Report

Commodity volatility will continue its rising trend since 2014. The US is on the brink of a major election, the outcome of which could reduce its willingness to engage with the outside world. So, states seeking to carve out their own spheres of influence are incentivized to raise the economic costs to the US and discourage its influence in their regions. These states can do this by interfering in key trading routes in their regions. As a result, geopolitical threats to maritime chokepoints are a structural as well as cyclical problem and will persist due to the revival of superpower competition.

Low inflation argues for the Fed to move relatively quickly toward rate cuts. Continued above-trend GDP growth poses a risk to this view, but leading indicators point to slower growth in the coming quarters.

We look at the implications for FX from the slew of central bank meetings this week.

In this Strategy Insight, we assess the monetary policy path for Australia and Canada in 2024 and we discuss how to profit from a growing divergence between the two economies.

An update to our outlooks for the Fed’s interest rate and balance sheet policies following this week’s remarks from Fed Governor Waller.

This report examines if investors should worry about a balance of payments crisis in the next 3-to-6 months.

The risk markets will be surprised by another 1mm b/d increase in crude oil supplies this year or next from the US is low, given the depletion of the unfinished-well inventory that drove shale output higher. Demand remains strong, although growth will slow. Higher non-OPEC 2.0 production, slowing demand growth, lower upside risk and the carryforward of elevated 2023 inventories take our 2024-25 Brent forecasts to $95/bbl and $105/bbl, respectively.

In light of the hotter-than-expected US CPI report, we look at what interest rate currency investors should focus on. Our conclusion largely keeps our existing trades in place, as published in our outlook, a few weeks ago.

We update our inflation forecast following this morning’s CPI report.