CoreMacro
| US
US macro analysis on the Fed, the consumer, and fiscal policy, and the investment calls that follow.
Profits are bottoming but the outlook is lackluster, even if further dollar weakness provides a temporary boost.
Like the economy, banks show no major imbalances. But the "glide path" for credit is slower than in previous cycles.
The equity bear case is obvious. Prices are approaching overhead resistance and face fundamental headwinds.
We are confident that the reward/risk tradeoff to holding equities and high-yield corporate bonds is deteriorating and that rallies in these assets are high-risk affairs.
The rally in risk assets could persist. Dollar and oil moves are not yet exhausted. But valuations and poor earnings quality warrant a cautious approach.
The Fed's decision to scale back intended interest rate hikes reflects economic reality.
Bearish sentiment, higher oil prices and Chinese policy stimulus leave room for a continued bounce in stock prices. But this rally is unlikely to prove sustainable.
The relief rally is not over, and could benefit from commodity and currency market movements. Oil prices likely are banging out a bottom. In general, however, a healthy dose of caution is warranted. Our bias is to sell into, rather than chase, rallies in risk assets.
