Monetary Policy
Median Fed unemployment rate projections are overly optimistic. The Fed will end up cutting more in 2026 than it currently anticipates.
The European Central Bank has achieved a soft landing. Inflation is back to target, with well-anchored inflation expectations. The unemployment rate is historically low, and real economic growth is stable, albeit weak. Given that little to no additional easing will come from the ECB, investors should underweight government bonds relative to equities.
In Section I, Doug notes that a negative stance toward stocks will require a meaningful and imminent deterioration in the US macro data given the ongoing impact of AI optimism on the global equity market. In Section II, Chester reviews the outlook for stablecoins, cryptocurrencies, and central bank digital currencies.
In Section II, Chester reviews the outlook for stablecoins, cryptocurrencies, and central bank digital currencies.
In a widely anticipated move, the RBA resumed cutting rates. However, with housing, consumption, and PMIs improving, we see little scope for the RBA to ease beyond market expectations.
The BoE is easing, but risks falling behind. Labor and growth cracks are starting to emerge, and the Bank may soon be forced to move more decisively. This report outlines why gilts remain a buy and sterling’s path is diverging vs. USD and EUR.
The Fed will keep rates on hold until the unemployment rate forces its hand.
The Bank of Canada continues to hold its policy rate amid trade uncertainty and shows little concern about the potential economic damage from tariffs. We judge the risks differently and view a bet on more rate cuts this year as attractive.
Despite macro headwinds, the OBBBA clearly favors Industrials, Financials, and Consumer Discretionary equity sectors. A carefully constructed, factor-aware basket in these sectors is well positioned to outperform in a fiscal-driven, uncertain environment.