Consumer

It may take several months for the tariff shock and policy uncertainty to filter through the real economy, but survey-based data are already sending a warning. Equities have priced in a lot of good news, and investors are too sanguine about the risk of a US recession.

The Fed held rates steady this afternoon, and the timing of its next move will be dictated by whether the tariff shock to inflation is transitory or more long lasting.

Hard aggregate macro data series remain solid, but surveys of businesses and consumers continue to worsen and the list of consumer-facing companies lowering earnings estimates gets longer by the week. We believe surging equities are ignoring the adverse effects of tariffs and reiterate our defensive asset allocation recommendations.

This year’s corporate bond sell off has hit high-yield more than investment grade, and high-yield spreads have turned relatively more attractive as a result.

US Treasuries typically outperform both equities and global government bonds during downturns. Recent political shifts could lessen that outperformance this cycle, but we doubt it will disappear completely.

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.

Europe’s near-term outlook remains clouded by uncertainty, even after the tariff reprieve. Our latest update breaks down why the risks to growth, profits, and financial conditions are still skewed to the downside — with Sweden standing out as a key bellwether.

The combination of dollar weakness and rising US yields suggests global investors are questioning the safe-haven status of US Treasuries.