Gov Sovereigns/Treasurys
We present the performance review of the Global Fixed Income Strategy Model Bond Portfolio for 2023. We also discuss the outlook for 2024 performance based on our Key Views for the year. The portfolio is positioned to benefit from a year where the global backdrop will be one of weak growth and further declines in inflation, leading central bank to begin cutting interest rates.
Commodity volatility will continue its rising trend since 2014. The US is on the brink of a major election, the outcome of which could reduce its willingness to engage with the outside world. So, states seeking to carve out their own spheres of influence are incentivized to raise the economic costs to the US and discourage its influence in their regions. These states can do this by interfering in key trading routes in their regions. As a result, geopolitical threats to maritime chokepoints are a structural as well as cyclical problem and will persist due to the revival of superpower competition.
Low inflation argues for the Fed to move relatively quickly toward rate cuts. Continued above-trend GDP growth poses a risk to this view, but leading indicators point to slower growth in the coming quarters.
In this Strategy Insight, we assess the monetary policy path for Australia and Canada in 2024 and we discuss how to profit from a growing divergence between the two economies.
Investors have taken comfort in the fact that unemployment has remained low in the major economies. But underneath the surface, there are clear signs that labor demand is weakening. The clock keeps ticking towards our H2 2024 recession call. After being bullish on risk assets last year, we are slowly turning more defensive.
An update to our outlooks for the Fed’s interest rate and balance sheet policies following this week’s remarks from Fed Governor Waller.
Decelerating nominal sales, a peaking credit cycle, and very high valuations - Indian stocks will not escape the carnage when risk assets globally begin to sell off.
The market will eventually be forced to react to rising odds of a sharp US national policy reversal. Investors should overweight government bonds and defensive equity sectors.
Our Portfolio Allocation Summary for January 2024.
A soft landing can be achieved but not maintained. We are cutting our tactical recommendation on stocks from overweight to neutral and scaling back our long-duration stance.