Gov Sovereigns/Treasurys

We consider the possibility that lower interest rates could lead to an increase in household borrowing, prolonging the economic recovery.

This insight parses through the RBA’s latest policy decision, and makes recommendations on whether to expect any rate cuts in 2024, and beyond.

In this report, we argue that the Bank of Japan is unlikely to hike interest rates this week, but the relative trajectory of bond yields in Japan is higher. This warrants an underweight position in JGBs and a leveraged bet on a higher yen. The positioning for equity investors is murkier, as progress on corporate reforms is necessary for a rerating in Japanese shares. That is not yet very clear. The bottom line is: Stay long the yen.

We update our bond views following today’s 50 bps rate cut.

Our Portfolio Allocation Summary for September 2024.

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.

Our negative stance on European growth and assets is not devoid of risks. To gauge whether these risks warrant upgrading our growth outlook, we monitor Sweden closely. So, what is the current message from this Nordic economy?

In this Special Report, we assess the impact of monetary policy tightening on major economies. Interest rate sensitive GDP already slowed significantly in response to the aggressive rate hiking cycle. Despite the beginning of policy easing, our forward-looking indicators suggest monetary policy will continue to weigh on the economy.

Investors should buy protection against further volatility. The shakeup in early August was a taste of things to come. The US election is a pivotal moment in modern history that will drive up uncertainty, while other countries take advantage of US division and distraction.