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Heading into a black hole, you pass a point of no return known as the ‘event horizon’ after which your impending oblivion is sealed. US recessions also have an event horizon, which we are fast approaching. We reveal a leading indicator of this event horizon, and what it means for investment strategy.

Fed Governor Lael Brainard delivered an important speech last week in which she laid out the intellectual justification for the Fed to soon pause its rate hike cycle. This week’s report reviews her arguments and explains how they inform our monetary policy and investment views.

Global investors should sell Chinese assets on strength this year and diversify into other emerging markets. American investors should limit China exposure. Short CNY-USD.

Our latest edition of the Big Bank Beige Book suggests that households, businesses and banks are in unusually good shape ahead of a recession.

In EM ex-China, growth will continue decelerating. Some economies will experience an outright recession, while most will have a growth recession. Nearly every single economy will experience a cyclical drop in inflation (with the exception of Turkey).

China’s re-opening – powered by the fiscal and monetary stimulus required to achieve at least 5% real GDP growth after flattish 2022 growth – and a weaker USD will catalyze demand growth this year and next, lifting global oil consumption by close to 2mm and 1.7mm b/d in 2023 and 2024. We lowered our Brent forecast slightly for this year to $110/bbl, and expect 2024 prices to average $115/bbl. WTI will trade $4-$6/bbl lower.

Investors should stay defensive on recession risks until they subside meaningfully.

We remain bullish the yen, despite the BoJ maintaining yield curve control. In this report, we outline a few reasons for this stance.

We remain bullish the yen, despite the BoJ maintaining yield curve control. In this report, we outline a few reasons for this stance.

Investors should bet against the global rally in risk assets and maintain a defensive positioning until recession risks verifiably abate.