Fixed Income
This morning’s jobs report serves to underscore that the labor market is not a source of inflationary pressure and therefore of second-order importance when it comes to the Fed’s near-term decision making.
Politics, wars, a global tightening cycle, doubts over AI capex: the wall of worry keeps rising. But the spark that would topple risk assets is missing. Our Q4 FICC outlook explains why to stay long risk, and where the danger lies.
Higher rates have changed the opportunity set. Overweight High-Yield Credit, both within asset allocation and versus Private Credit. Investors are no longer picking up pennies in front of a steamroller.
MacroQuant recommends an underweight to equities and bonds, counterbalanced by a significant overweight to cash. The model is very bullish on the US dollar, slightly negative on gold and copper, and positive on oil.
Core US inflation is still running above target. But this morning’s data revisions reveal that the gap is not nearly as large as it appeared yesterday.
