Developed Countries

We explain how to distinguish between ‘good’, ‘bad’ and ‘ugly’ unemployment, why bad unemployment is a much better gauge of the jobs market than headline unemployment, and what this means for the tactical positioning in bonds and stocks. Plus: base metals (XBM) have already sold off sharply, so take profits in the short position and open a tactical overweight in global materials (MXI).

Our Portfolio Allocation Summary for July 2024.

Concerns about the global economy have shifted from sticky inflation to faltering growth. Tight monetary policy is finally starting to bite. We suggest increasing portfolio defensiveness.

In this report, we try to gauge how long the exceptional performance of the US can last, but from a more nuanced angle – inflows into US assets and the impact on the dollar and bond yields. Our work suggests that investors should not make any huge bets on the dollar today, but should be short over the longer term (3-5 years). Empirical evidence also suggests you want to be long US bonds into any downturn, relative to global-ex-US duration-matched government securities, but that view becomes less certain if the global economy avoids a downturn in the next few months. What is interesting in this report are high some conviction views across currencies, bonds and precious metals.