United States
The recent breakdown in cross-asset correlations highlights mounting risk premia on US assets. Last week, the long-standing correlations underpinning our understanding of global markets violently broke down. The Treasury market turmoil had already broken the…
The US dollar’s reserve status is not done, but its foundations are starting to crack. Our Chart Of The Week comes from Juan Correa, Chief Global Asset Allocation Strategist. Most defensive currencies, like the yen and the Swiss franc, benefit from a positive…
The sharp drop in consumer sentiment and rise in inflation expectations reinforce our defensive positioning and preference for long-duration bonds. The preliminary April University of Michigan Consumer Sentiment Index fell to 50.8 from 57.0 in March, missing…
Bonds are failing to deliver defensive convexity; asset allocators should look to tactical curve steepeners for protection. Despite rising growth fears, Treasury yields have risen sharply at the long end. This is a clear break from the typical recession…
The combination of dollar weakness and rising US yields suggests global investors are questioning the safe-haven status of US Treasuries.
Barring a dramatic further de-escalation of the trade war, the US and much of the rest of the world will enter a recession over the next few months. Investors should remain defensively positioned for now.
Dips in European assets remain long-term buying opportunities, even though short-term risks abound. A notable feature of the recent selloff is that US safe havens failed to rally. In a global growth scare, both the US dollar and Treasuries typically benefit.…
Will US-China Trade War Escalate To Real War?
China’s aggressive retaliation against U.S. tariffs will enable President Trump to shift from punishing allies and redirect the trade war toward China. If Beijing does not react to the latest tariffs by doubling its fiscal stimulus, it indicates they are planning something different, as China will encounter economic destabilization. The likelihood of a hybrid military pressure on Taiwan will rise.
We maintain a defensive asset allocation, as the hit to confidence will linger even if tariff tensions ease. The past few days have seen sharp volatility, with trade headlines swinging markets between despair and euphoria. At the time of writing, President…
We maintain an overweight in government bonds, as recent yield spikes appear technical and unsustainable. US 10-year Treasury yields have surged even as global markets were selling off on growth fears. The move has spread to higher-yielding DMs like the UK,…