イールドカーブ

History suggests that a “soft landing” is highly unlikely after such an aggressive Fed tightening cycle. The rally could continue for a little longer but, on the 12-month horizon, market risks are very skewed to the downside.

Falling inflation enables central banks to pause rate hikes, which is good news. But time goes on. Restrictive monetary policy, Chinese debt-deflation, energy supply shocks, US and global policy uncertainty, and extreme geopolitical risks will undermine hopes of a soft landing and beautiful disinflation.

An outlook for inflation and Fed policy following this morning’s CPI report.

This week we present our Portfolio Allocation Summary for July 2023.

A perspective on the recent increase in US bond yields and this morning’s employment report.

Recession is on track to start around year-end. Stocks usually peak shortly before recession begins. So, position defensively but be prepared for a few more months of the rally.

We build a four-stage business cycle framework based on economic growth and capacity utilization, and then analyze historical returns for most major asset allocation decisions for each stage. Given that we are in the early recession stage (negative growth coupled and an overheated economy), our framework recommends a defensive positioning across all asset classes.

In this Strategy Outlook, we present the major investment themes and views we see playing out for the rest of 2023 and beyond.