Money/Credit/Debt
The prices of multiple financial assets have failed to break above their technical resistances. When this occurs, a breakdown ensues. In brief, global risk assets remain vulnerable. We are upgrading Chinese onshore stocks from neutral to overweight and offshore ones from underweight to neutral within EM and global equity portfolios.
Mounting evidence that the labor market is on its way to cracking checked two more boxes on our checklist, driving us to tactically downgrade equities to underweight while upgrading fixed income to overweight. Our tactical and cyclical (6-12 months) views are now aligned as our conviction that a recession will begin before year-end has increased.
Republicans are favored but the election is still competitive. Equities, corporate credit, and cyclical sectors will fall until policy uncertainty is reduced.
Investors hope that the ECB rate cuts priced into the curve will be sufficient to achieve a soft landing in Europe. History argues against this view, but will this time be different?
Oil markets will not be impacted by Venezuela in the near term, but by shocks from the Middle East. Maduro’s ability to stay in power in the short-term removes an avenue of oil supply relief. The same avenue is cut off if Trump is reelected. Geopolitical shocks in Venezuela could present tactical buying opportunities for Chile, Peru, and Colombia.
