CoreMacro

The analysis of price complexity strongly suggests that the ‘yen carry trade’ and the AI bubble are one and the same trade, and that the trade has further to unwind. Plus, go tactically overweight China (CHIQ).

The unwind of yen carry trades caused violent tremors across the globe. Was this shock a one-off event or the prelude to more troubles?

The market backdrop changed a lot between the preparation and the publication of our equity downgrade report. We publish this companion Insight to help investors navigate the new environment.

Over the past few weeks, global equities have been hit by rising scepticism over the bullish AI narrative and increasing concerns over global growth. Stocks should stabilize in the near term, but the medium-term direction is to the downside. We expect the S&P 500 to drop to 3750 in 2025 and the 10-year Treasury yield to fall to 3%.

Why the Joshi rule gives a much better signal than the Sahm rule, and what it means for the US economy, the US election, and the markets.

The prices of multiple financial assets have failed to break above their technical resistances. When this occurs, a breakdown ensues. In brief, global risk assets remain vulnerable. We are upgrading Chinese onshore stocks from neutral to overweight and offshore ones from underweight to neutral within EM and global equity portfolios.

China's cyclical and structural headwinds will likely undermine Beijing’s initiative to accelerate urban migration over the next five years.

Special Report

GeoMacro team partners with BCA’s Emerging Markets Strategy to examine political reforms in Argentina. Our colleague Juan Egaña argues that the time is not right to go long Argentinian assets and that Buenos Aires must avoid the mistakes of the Macri era: opening to foreign capital flows too soon without addressing structural macro imbalances. However, the Milei administration is on the right path with potentially global implications.

Absolute return investors should be tactically cautious on Greek assets. Dedicated EM equity portfolios, however, should overweight Greek stocks.

Mounting evidence that the labor market is on its way to cracking checked two more boxes on our checklist, driving us to tactically downgrade equities to underweight while upgrading fixed income to overweight. Our tactical and cyclical (6-12 months) views are now aligned as our conviction that a recession will begin before year-end has increased.