Fixed Income
Eventually South Africa will do its macro rebalancing the least painful way: via adjustments in nominal variables such as prices and currency, rather than in real variables such as jobs and incomes. That entails a much weaker rand in future.
When complexity collapses, it is a red flag for impending tail-events, heart attacks, and reversals in the markets. We describe how to measure complexity, how to spot the red flag that it has collapsed, and list some investments that are approaching potential turning-points.
Bullish equity sentiment may persist in the second quarter on the Fed’s pause, but tight monetary policy, financial instability, elevated recession odds, extreme US polarization and policy uncertainty, and still-high geopolitical risk should encourage investors to maintain a defensive position for the coming 12 months.
This week we present our Portfolio Allocation Summary for April 2023.
High rates have hurt real estate and, now, banks. The next shoes to drop: Loan growth, profits, and employment. Stay defensive. Recession is probable, but risk assets have not priced it in.
Is the European banking system hiding nasty surprises? How will the recent stress affect European growth and the ECB’s policy outlook?
We think the banking turmoil set off by Silicon Valley Bank’s failure will prove to be less than it’s been cracked up to be and that it will not derail the near-term equity we expect.
Colombian assets are inexpensive, but they are cheap for a reason. The economy is entering a growth recession while inflation will remain sticky and above target. Further, President Gustavo Petro’s policies will lead to lower investment, rising political volatility, and public debt deterioration. Continue underweighting Colombia across all asset classes.
This US Bond Strategy Insight takes an in-depth look at core non-housing services inflation.
Stay defensive in the second quarter. We can see a narrow window for risky assets to outperform but we recommend investors stay wary amid high rates, supply risks, extreme uncertainty, peak polarization, and structurally rising geopolitical risk.