CoreMacro

European assets and the euro have become oversold and are likely to rebound. Will this move be nothing more than a dead cat bounce leading to more weakness?

Earnings reports and commentary from major retailers confirm that the consumer continues to lose momentum, while signs that the labor market continues to cool suggest that household income growth is poised to slow. We reiterate our downbeat fundamental take and our defensive asset allocation recommendations.

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The value of both gold and bitcoin comes from the collective belief that they are the non-confiscatable assets to own in a fiat monetary system, as an insurance against hyperinflation, banking system failure, or state expropriation. As global wealth rises, the value of both gold and bitcoin will also rise. But as bitcoin takes market share from gold, bitcoin has considerably more upside than gold, with an ultimate destination of $200,000+. Plus: 10-year T-bonds and Portuguese stocks are tactically oversold.

Trump's presidential re-election makes US tariff rate hikes on Chinese exports an imminent threat. Beijing has made extensive efforts to derisk the domestic economy and diversify trade away from the US. However, China is no better positioned today than it was in 2018 to withstand the impact of a renewed trade war.

The threat of import tariffs and US growth outperformance versus the rest of the world will continue supporting the US dollar rally over the near term. Nevertheless, the Trump administration’s medium- to long-term goal will be a US dollar devaluation to boost the country’s manufacturing competitiveness. We will recommend upgrading EM stocks and bonds when we downgrade our US dollar view.