Gov Sovereigns/Treasurys
Introducing our Special Series to assess where Portugal, Italy, Greece, and Spain stand today. Stay tuned for more.
In this Strategy Outlook, we present the major investment themes and views we see playing out for the rest of 2023 and beyond.
A discussion of today’s FOMC meeting and its investment implications.
China’s reopening faltered and now it is applying moderate stimulus. OPEC 2.0’s production discipline is getting results, with oil prices climbing. The Fed will not be able to deliver dovish surprises in Q4 2023. Investors should expect stock market and commodity volatility and prefer defensive positioning.
Top-down measures of nonfinancial corporate sector balance sheet health have been flattered in recent quarters by inaccurate data on interest expense. After correcting for the inaccurate data, we see that our best measures of corporate balance sheet health show a persistent steady deterioration.
While we are sympathetic to the view that the Fed could temporarily achieve a soft landing, we are skeptical that it could stick that landing for very long. Stocks could strengthen into year-end, with small caps potentially leading the charge. But the rally will fizzle out next year as the global economy begins to sink into recession.
The implications of this morning’s CPI report for Fed policy, Treasuries and TIPS.
US bond investment takeaways from this week’s PCE and employment releases.
A global recession continues to be likely over the next 12 months. The impact of tighter monetary policy is slowly being felt. Government bonds look increasingly attractive as a safe haven.
We comment on Jay Powell’s Jackson Hole speech and recommend shifting to a barbelled allocation along the Treasury curve.