Fiscal

GeoMacro team partners with BCA’s Emerging Markets Strategy to examine political reforms in Argentina. Our colleague Juan Egaña argues that the time is not right to go long Argentinian assets and that Buenos Aires must avoid the mistakes of the Macri era: opening to foreign capital flows too soon without addressing structural macro imbalances. However, the Milei administration is on the right path with potentially global implications.

The decision by GeoMacro team on July 2 to short USDJPY and underweight equities has proven to be prescient. We still do not like the market setup from here on out. A recession would, obviously, be negative for risk assets. But even if investors avoid that scenario, the transition from cash- to leverage-driven growth is unlikely without a significant Fed rate-cutting cycle.

Republicans are favored but the election is still competitive. Equities, corporate credit, and cyclical sectors will fall until policy uncertainty is reduced.

Investors should overweight US assets and de-risk their portfolios in anticipation of a major increase in policy uncertainty and geopolitical risk surrounding the US election and its global ramifications.

Don't buy the dip. The equity bull market is over. The US will enter a recession in late 2024 or in early 2025.

The real threat to European equities is growth, not political risk. How low will Eurozone earnings fall during the coming recession and how much will equities decline in response?