Money/Credit/Debt
This week’s US Bond Strategy Special Report takes a look at the two most provocative papers presented at last month’s Jackson Hole conference.
Core Europe’s industrial sector will relapse in the coming months due to US tariffs and a strong euro. Investors can play the imminent deflationary shock by being long Central European bonds. They should, however, hedge the currency risk vis-à-vis the euro.
Investors should modestly underweight equities in their portfolios and look to turn more aggressively defensive once the whites of the recession’s eyes are visible. We think that will happen within the next few months.
Bond market volatility will spike again in the near term. The Fed is committed to an easing cycle yet the Trump administration’s signature fiscal policy action will stimulate the economy. Tariffs are supposed to keep the budget deficit contained but they are inflationary.
