Mega Themes
President Biden is facing foreign challenges on three fronts and these challenges are coalescing around the critical states of the Midwest. Take risks off the table and stay defensive in 2024.
China’s capital outflows will likely remain substantial at least through the next few quarters. This wave of capital outflows will likely be more chronic, albeit less acute than the 2015-16 episode. Persistent capital outflows will exert downward pressure on the RMB.
US and Chinese oil-demand strength will offset EU weakness next year. Incremental supply growth from non-OPEC 2.0 producers, coupled with a lower risk of the US enforcing its sanctions on Iranian oil exports, reduces our 2024 Brent price forecast by $6/bbl, and takes it to $112/bbl.
This week’s Special report revisits our TIPS Golden Rule. We provide a 12-month inflation forecast and discuss how it impacts our TIPS view.
The latest ‘nowcast’ for world economic growth in the fourth quarter has plunged to just 1.2 percent, marking the cusp of another world recession. One important implication is that expectations for oil demand growth and industrial metal demand growth are way too optimistic.
Many commentators have attributed the latest increase in Chinese interest rates to an improving economy, the large issuance of government bonds, the tax payments season, and other technical factors. Yet, these explanations are missing the key point: the PBoC has steered interbank rates higher to defend the currency. Higher borrowing costs are the last thing the mainland economy now needs.
In this Insight, we review the performance and rationale for our current set of tactical fixed income trade recommendations. Our highest conviction positions also happen to be our most successful trades: positioning for a narrowing of the German bund-JGB spread and wider Japanese inflation breakevens.
The Netherlands has a healthier and more stable economy and demography than its European peers. Investors should stay overweight developed European equities, including Dutch equities, relative to emerging European equities.
Results from Tuesday’s elections suggest that the Democrats are doing better than what their 2024 polling are showing. While the results are marginally positive for equities, investors should not overrate this off-year election, especially considering the slowing economy and the many foreign challenges facing the US.
Following the October US jobs data, the ‘Joshi rule’ real-time US recession indicator increased from 0.11 to 0.15, meaning that it is fast approaching its event horizon of 0.20. We go through the investment implications. We also highlight a new long-term recommendation. Plus, the Norwegian krone is close to a potential rebound.