Debt Trends

Highlights Duration: Fed Governor Lael Brainard stated last week that many of the headwinds that held back growth between 2014 and 2016 have faded. This acknowledgement from the most dovish Fed Governor opens the door for a more aggressive pace of Fed rate hikes, and gives the green light to…

Highlights We are shifting our U.S. recession call from late-2019 to 2020. A cheap dollar and fiscal support will give the Fed more scope to raise rates before monetary policy moves into restrictive territory. The fiscal impulse will fall sharply in 2020. By then, financial conditions will be…

Highlights The combined U.S. current account and fiscal deficits are set to rise as Trump's profligacy and higher interest rates kick in. In and of itself, this does not spell doom for the dollar. The Fed's response to the twin deficit is what will ultimately set the path for the greenback.…

Highlights The financial landscape has shifted over the past month with the arrival of some inflation 'green shoots' and a major shift in U.S. fiscal policy. Fiscal policy is shaping up to be a major source of demand and a possible headache for the FOMC. Tax cuts and the spending deal will…

Highlights The call on EM local bonds boils down to the outlook for EM exchange rates. Forthcoming EM currency depreciation will halt the rally in local bonds. EM currencies positively correlate with commodities prices but not with domestic real interest rates. Widening U.S. twin deficits…

Highlights Global growth will remain strong in 2018, but the composition of that growth will shift in favour of the U.S. The surprise results of the Alabama Senate election are unlikely to scuttle the Republicans' tax plans. We expect a bill to be finalized by the end of the year. The Fed is…

Highlights The cyclical bull market in stocks will last until the end of next year. That said, global equities have become increasingly vulnerable to a correction, so fast-money investors should consider putting on a tactical hedge spanning the next few weeks. The passage of tax legislation in…

Highlights The private sectors in Brazil, Russia and India have indeed experienced some deleveraging. Yet in China, deleveraging has not even begun. In fact, the money and credit excesses have become ever larger in the past two years. China's broad money (M3) is as large as the entire…

Highlights Duration: As long as inflation shows signs of stabilizing during the next couple of months the Fed will lift rates again in December. Stay at below-benchmark duration and remain overweight TIPS versus nominal Treasuries. Credit Cycle: The process of corporate sector re-leveraging is…

Dear Client, I am visiting clients this week, and as such there will be no Weekly Report. Instead, we are sending you this Special Report written by my colleague Jonathan LaBerge. Jonathan argues that while the recent acceleration of the Canadian economy is genuine, the rise in Canadian household…