Labor Market

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.

In Part 2 of this series, we prescribe the treatment needed to produce a recovery for the ailing Chinese economy. Authorities will only panic and unleash “irrigation-style” stimulus if the unemployment rate rises sharply, or a financial crisis unravels in onshore markets. This is not yet the case.

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.