Monthly TAA: MAGA vs. The “Globalists” – Round 2

Fiscal policy, not tariffs, is now driving markets as Congress advances the One Big Beautiful Bill. The Senate cannot afford to remove the spending cuts in the bill, as they risk sparking a bond market riot. Even with this more modest bill, US interest rates are already pressuring housing and labor markets. US assets are also losing their defensive tilt. Better opportunities for both equity and fixed income investors are available internationally. We conserve our defensive stance but do not want to be dogmatic. Sentiment is more cautious than last year, and the US economy is not showing signs of imminent collapse. We remain underweight the US dollar and US equities. Upgrade Communication Services and downgrade Consumer Staples. Upgrade the CNY and EM currencies to neutral.