Inflation/Deflation
Bank failures are another ‘canary in the coal mine’ warning that a US recession is imminent, yet stocks, bonds, and the oil price are still a long way from fully pricing it.
The growth and inflation profiles of the three central European countries are set to diverge. The outlook for Polish and Hungarian Bonds are not attractive anymore. Book profits on them. Instead, initiate a new trade: pay Polish / receive Czech 10-year swap rates.
The UK economy is more resilient than was feared last year. While this will not help UK stocks, the Footsie’s long term prospects are appealing.
Investors in Europe and the American West are already starting to think about the implications of the 2024 election, given that sticky inflation and tighter monetary policy keep the risk of recession elevated.
The first legislative meeting of Xi Jinping’s third term suggests that Chinese policy is continuous and consistent with the previous ten years, which is negative for long-term productivity.
This week’s <i>Special Report</i>, written by Miroslav Aradski, highlights the worrisome deterioration in health trends in the US, which began before the pandemic. Over the long haul, this could weigh on labor supply and productivity, put upward pressure on bond yields, and hurt equity multiples.
The combination of collapsing energy inflation and cooling wage inflation means that euro area core inflation will slump later this year. We discuss the consequences.
The Chilean economy is entering a recession. Inflation will drop rapidly and the central bank will cut rates meaningfully in H2 2023. We continue to recommend a structural overweight across Chilean risk assets on the basis of falling inflation and local yields, record cheap valuations, and dissipated political volatility.
A run of hot January data shook up financial markets, but we think they overreacted. We remain constructive on equities and the economy in the near term.
In this week’s report, we speculate on the evolution of euro trading in light of the near-term hiccups, but tremendous value that can be unlocked for longer-term investors.