Labor Market

UK and German bonds are victims of the global bond market riots. Will European yields continue to move higher and will the euro and the pound find a floor anytime soon? 

Thoughts on the increase in bond yields and this morning’s employment data.

Paradoxically, raging optimism on the US economy is making a reacceleration in growth less likely in 2025. The reaction of the bond market has made the Fed rethink its cutting campaign. Markets are also constraining Trump’s agenda. US manufacturing will not recover with a surging dollar. Fears of inflation and debt sustainability have made moderate House Republicans push back against the President Elect’s wishes. Given the sky-high optimism embedded in asset prices, we believe a defensive portfolio stance is warranted on a 12-month horizon. Overweight gold to hedge the risk of a fiscal crisis.

Our outlook for Fed policy in 2025 discusses our expectations for interest rates, the Fed’s balance sheet and the 2025 strategic review. 

For our last publication of the year, we explore five key themes that will dominate the European macro landscape and markets next year. While the start of 2025 will be challenging for European assets, the latter part will offer some much-needed relief.