CoreMacro

Going into this year, I was by far the most bearish strategist in the Bloomberg survey. A number of clients have reached out to me asking if I plan to change my end-year price of 4450 for the S&P 500 in light of recent events. The answer is “no,” since recent events have unfolded broadly in line with my expectations.

Trump’s tariff shock will push Europe into recession — but it’s also triggering a powerful integration response. In this report, we lay out the tactical case for staying defensive and the structural case for going long European assets when the dust settles.

The stimulus measures driving the post-COVID expansion were beginning to wane after five years and pointing the economy in the direction of an organically occurring recession. Now that DOGE and the multi-front trade war have sped up the timetable, we reiterate our risk-off recommendations.

On the one hand, US tariffs are much more deflationary for the rest of the world than for the US, so interest rate differentials might move in favor of the US dollar in the near term. On the other hand, portfolio outflows from the US will weigh on the greenback over a cyclical horizon. We recommend buying Mexican and Central European domestic bonds.

Tariffs will make a difficult job almost impossible. Hitting and sustaining a precise 2 percent inflation target is more about luck than judgement. It requires both the starting point for inflation expectations and any inflation/deflation shock to combine perfectly to 2 percent. While structural inflation expectations in the euro area and Japan could be close to 2 percent, those in the US and the UK will be stuck uncomfortably above 2 percent. We discuss the investment implications for rates and FX. Plus: gold is vulnerable to a tactical reversal.

Going into April, MacroQuant recommends a modest underweight on stocks, offset by an overweight on bonds and cash. While MacroQuant is modestly bearish on stocks, we suspect that the downside risks to equities may be greater than what the model assumes.

With economic headwinds building and fiscal dynamics shifting, bond markets are at a turning point. Our latest note outlines why German bund yields are set to decline and why UK gilts are poised to outperform — and how to position accordingly.

In this Second Quarter Strategy Outlook, we explore the major trends that are set to drive financial markets for the rest of 2025 and beyond.

The US economy has never entered a demand-driven recession without labour demand running below labour supply and without the job vacancy rate running below the unemployment rate. Right now though, US labour demand is still running 1.7 million workers above labour supply, and the job vacancy rate is running comfortably above the unemployment rate. This suggests that the labour market is still supply-constrained, and that a demand-driven recession is not imminent. We discuss the investment implications. Plus, more about our ‘trade of the century’: long cotton versus coffee.