Fiscal

Favor defensive sectors, low-beta assets, and long-duration bonds until the election uncertainty is lifted one way or another over the next five months.

In this Special Report we assess the absolute and relative attractiveness of developed market government bonds using several fair value models. Longer-term investors who are focused on value should overweight US long-maturity bonds, and favor Spanish, Australian, and potentially UK government bonds within a DM ex-US allocation.

Looking at economic activity, global monetary policy seems restrictive, however, the behavior of financial markets tells a different story. What gives?

China is trying to export its way out of its economic slowdown while the US has already formed a hawkish consensus on foreign policy and trade. Investors should take cover as global financial markets are underrating the new phase of the trade war, which will escalate from here.

ASEAN stocks and currencies will weaken further as these economies face multiple headwinds. Raising policy rates did not stop a sliding currency in the past, it is unlikely to do so now.