Fixed Income
US bond yields will move higher, unleashing a storm in global financial markets. In the US, rising corporate bond yields will produce a selloff in share prices. In Mainstream EM, rising domestic and USD bond yields will weigh on share prices.
Our Portfolio Allocation Summary for January 2025.
Paradoxically, raging optimism on the US economy is making a reacceleration in growth less likely in 2025. The reaction of the bond market has made the Fed rethink its cutting campaign. Markets are also constraining Trump’s agenda. US manufacturing will not recover with a surging dollar. Fears of inflation and debt sustainability have made moderate House Republicans push back against the President Elect’s wishes. Given the sky-high optimism embedded in asset prices, we believe a defensive portfolio stance is warranted on a 12-month horizon. Overweight gold to hedge the risk of a fiscal crisis.