Labor Market

Stocks should continue to rally in the near term, but investors should prepare to turn more defensive towards the end of the year in advance of a recession in 2024.

We comment on Jay Powell’s Jackson Hole speech and recommend shifting to a barbelled allocation along the Treasury curve.

Today’s Strategy Report chartbook presents the data underpinning our view that both inflation and growth are slowing, likely pointing to a recession beginning sometime in the first half of next year. We are tactically equal weight across asset classes after being stopped out of our equity overweight on August 17th and expect our next move will be to underweight equities and overweight fixed income, in line with our twelve-month view.

The next six-to-nine months hold a crucial test of whether the equity market will ratify the soft landing and the Biden administration or not. If so, then markets will rally on policy continuity and likely gridlock. If not, then markets will struggle until the election is over and again in 2025-26.

In this special report, we discuss whether the economic conditions necessary for a stronger yen (and higher JGB yields) will materialize over the next 12-to-18 months.

The next six-to-nine months hold a crucial test of whether the equity market will ratify the soft landing and the Biden administration or not. If so, then markets will rally on policy continuity and likely gridlock. If not, then markets will struggle until the election is over and again in 2025-26.