Estados Unidos

The recent uncertainty regarding the health of the banking systems in the US and Europe is not having any material impact on overall financial conditions or economic sentiment. The aggressive rate cut expectations, especially in the US, are unlikely to be realized. Although the macro growth and policy backdrop remains unfriendly for corporate debt on both sides of the Atlantic.

China is launching a diplomatic charm offensive to improve relations with the world excluding the United States. But China’s proposals in Ukraine and the Middle East are overrated in their ability to restore global stability and reduce geopolitical risk.

It is too early to know whether the drop in bond yields will offset the drag on growth from tighter lending standards. But if it does, the net effect on equity valuations could be positive. This is enough to justify a modest tactical overweight to equities, with the proviso that investors should look to reduce equity exposure later this year in advance of a mild recession in 2024.

The Fed lifted rates 25 bps yesterday while also signaling that the tightening cycle is near its peak. We discuss the short-run and long-run implications for Treasury yields.