Economic Growth

Stocks perform worse in presidential election years than average years, especially in the first half of the year, and especially if the ruling party ends up falling from power. Investors should take risk off the table until the unemployment rate peaks.

In this week’s report, we assess the key reasons why the dollar has risen, and if that is set to continue.

If we look at global growth as an aircraft, the plane is experiencing failing engines and will lose more altitude in the coming months. Yet, neither Chinese authorities, nor the Fed or the ECB will be quick to come to the rescue as global growth downshifts. These dynamics herald a stronger US dollar and lower EM risk asset prices.

The geopolitical backdrop remains negative despite some marginally less negative news. China’s stimulus is not yet large or fast enough to prevent a market riot. Two of our preferred equity regions, ASEAN and Europe, are struggling to outperform. Investors should stay defensive overall.