Monetary Policy
In today’s Strategy Insight, we discuss the monetary policy outlook for the Bank of Japan, following the 25-bps rate hike overnight, and what it means for JGBs and the yen.
There is no better way to gauge the macro policies of the new US administration than being privy to President Donald Trump’s discussions with the new Treasury Secretary, Scott Bessent. While we do not have inside information, we have put the pieces of the puzzle together to help clients see the big picture. This report presents our take on a hypothetical conversation between President Trump and Scott Bessent that led to the latter’s appointment as Treasury secretary.
Today, we publish our Quarterly Model Bond Portfolio report. We review the performance of the portfolio in 2024 and discuss how to best position a global fixed income portfolio following the sharp rise in yields during the last months.
Our outlook for Fed policy in 2025 discusses our expectations for interest rates, the Fed’s balance sheet and the 2025 strategic review.
Our thoughts on this afternoon’s Fed decision and the bond market reaction.
To produce a moderate economic recovery, at least RMB 3 trillion in additional government expenditures is needed in H1 2025. Our bias is that Beijing is not yet ready to launch such a massive fiscal support measure. Hence, volatility-adjusted equity returns in China will be poor.
Favor Health Care and Utilities for defensive positioning amid economic slowdown and volatility as the presidential election approaches. A Republican Sweep favors Real Estate and Materials, while the second most likely outcome, Democrat gridlock, favors Health Care, and Information Technology.
In this Special Report, we assess the impact of monetary policy tightening on major economies. Interest rate sensitive GDP already slowed significantly in response to the aggressive rate hiking cycle. Despite the beginning of policy easing, our forward-looking indicators suggest monetary policy will continue to weigh on the economy.
The current Fed easing cycle will likely be a “buy the rumor, sell the news” phenomenon. The basis is our expectation that the US economy is heading into a rough landing. The primary driver of EM currencies is not US interest rates but the global manufacturing cycle.
The cyclical economy is slowing today. Republicans are now more likely to win a full sweep, crack down on immigration and trade, and at least modestly stimulate the economy. Uncertainty and volatility will rise.