Estados Unidos

Europe’s weak patch is not about the ECB’s policy tightening, at least not yet. 2024 is another story, and the ECB’s policy will prompt a Eurozone’s recession around the summer.

The biggest banks report that consumer credit card delinquencies still have yet to get back to pre-COVID levels and other credit performance indicators, leading and lagging, remain solid. There is still a great deal of cash sloshing around the banking system, though consumption has clearly slowed. We reiterate our view that a recession is coming, but not before the year is out.

There is a high probability that the global economy will tip into recession in the second half of 2024. A long yen position is an excellent hedge against that risk.

Despite higher uncertainty, our Brent price forecasts remain unchanged at just over $101/bbl for 4Q23 and $118/bbl for next year. We remain long equity exposure to oil and gas producers via the XOP ETF, and commodity exposure via the COMT ETF. We also remain long $100 Dec24 Brent calls and long 1Q24 Brent futures vs. short 1Q25 Brent futures in anticipation of stronger backwardation.