Financial Markets
Our China strategists remain defensive and tactically downgrade MSCI China to underweight, citing escalating US China tariff tensions and subdued domestic demand. Favor government bonds over equities, defensive sectors, and A-Shares over offshore Chinese…
Our Commodity strategists remain defensive as both demand- and supply risks abound. Stay long gold and underweight oil and copper as increasing OPEC+ supply and tariff-driven demand risks will hurt energy and industrial metals prices. The motivations…
Soft data continues to deteriorate and hard data will soon follow, reinforcing our defensive asset allocation. Consumer and business confidence have plunged as policy uncertainty and inflation expectations rise, with spending, hiring and capex plans…
Tariff-driven inflation is diverging across economies, with the US facing mounting pressures while disinflation persists elsewhere. In theory, US tariffs should strengthen the dollar and weaken targeted currencies. In practice, the opposite has occurred: The…
The recent breakdown in cross-asset correlations highlights mounting risk premia on US assets. Last week, the long-standing correlations underpinning our understanding of global markets violently broke down. The Treasury market turmoil had already broken the…
Bonds are failing to deliver defensive convexity; asset allocators should look to tactical curve steepeners for protection. Despite rising growth fears, Treasury yields have risen sharply at the long end. This is a clear break from the typical recession…
Barring a dramatic further de-escalation of the trade war, the US and much of the rest of the world will enter a recession over the next few months. Investors should remain defensively positioned for now.
Dips in European assets remain long-term buying opportunities, even though short-term risks abound. A notable feature of the recent selloff is that US safe havens failed to rally. In a global growth scare, both the US dollar and Treasuries typically benefit.…
Our Global Fixed Income strategists continue to recommend long duration exposure, curve steepeners, and an underweight in corporate bonds relative to government bonds, as global recession risks rise. The trade war has increased the odds of a downturn, but the…
We maintain an overweight in government bonds, as recent yield spikes appear technical and unsustainable. US 10-year Treasury yields have surged even as global markets were selling off on growth fears. The move has spread to higher-yielding DMs like the UK,…