Money/Credit/Debt

In financial systems, cracks typically begin on the periphery and then expand to the center. Hence, the ruptures on the fringes often act as an early warning. These fissures tend to widen and spread to the core, causing a breakdown in the S&P 500. Investors should consider buying US Treasurys aggressively when the S&P 500 slips below 4,000.

We maintain our view that China’s economic growth in the coming months will remain lackluster. Beijing's recent measures to provide additional financing may help to bridge the gap in government spending in the rest of 2023 and into 2024, but the impact on growth will be very limited.

China’s economic growth will stagnate, at best, rather than revive. Lower valuations of Chinese equities are justified, and share prices have more downside. The RMB will continue to depreciate versus the US dollar.

Europe’s weak patch is not about the ECB’s policy tightening, at least not yet. 2024 is another story, and the ECB’s policy will prompt a Eurozone’s recession around the summer.