Economic Growth
Are bunds the new Treasurys? The euro and German debt are gaining favor as safe havens, but markets may be overplaying the shift. Our latest report dissects what's durable, what's not, and how to trade the dislocation.
Do not play the bounce in US and global cyclical assets as Trump backpedals from the trade war. China will talk, but the pace will be slow and the outcome disappointing. Fiscal stimulus will surprise marginally in the EU, China, and even the US, but still may not rescue the business cycle.
Although the sell-off in the US dollar and relative outperformance of non-US stocks will pause over the coming months as a global recession begins, the fading of US exceptionalism will still cause the dollar to weaken and US stocks to underperform over a multi-year horizon.
The policy-induced decline in consumer confidence has spread to businesses and investors, increasing the probability of a recession even if the administration reverses field on its aggressive tariff measures. We reiterate our defensive asset allocation recommendations.
Fed Chair Jay Powell’s remarks yesterday were in-line with our base case expectation that the Fed will not cut rates proactively in the face of rising tariff-driven inflation.
Trump’s tariff shock will push Europe into recession — but it’s also triggering a powerful integration response. In this report, we lay out the tactical case for staying defensive and the structural case for going long European assets when the dust settles.
