Gold

Can Powell achieve a soft landing? There are some indications he is doing it. We examine why our negative stance was wrong and analyze the four growth engines that kept recession at bay. Half of these forces remain while the other half have run out of juice. While this might be enough to keep the economy going, we maintain our defensive positioning. Equities have priced a very benign outcome. Meanwhile, rising rates in anticipation of a Trump win are pushing the economy away from the soft-landing path. We hedge the possibility of further upside in yields in case Trump gets elected by downgrading duration to neutral.

The market got excited by the 50 bps Fed cut and China stimulus. But these are a recognition that economies are slowing significantly. Stocks often rally after the first Fed cut, before falling sharply. Investors should stay defensive.

MacroQuant continues to recommend underweighting equities and overweighting bonds. This is consistent with the Global Investment Strategy Team's decision to downgrade global equities to underweight in late June.

The great US labor market shortage is over. Labor demand will likely fall short of supply by the end of this year, causing unemployment to soar. Neither fiscal nor monetary policy will be able to prevent the coming recession. Investors should underweight stocks and overweight Treasuries.