Policy
Expectations for oil demand growth through 2023-24 are way too optimistic. Until these expectations fall to -0.5-1 percent, the oil price has further downside. Plus: collapsed complexity confirms that AI is in a mania, while basic materials stocks and ZAR/EUR are rebound candidates.
President Erdogan and the Justice and Development Party emerged as the winner of the Turkish general election which was concluded yesterday. This victory means that their expansive policies of the past decade will continue, and Turkish assets will suffer. Across the Aegean, the Greeks voted to reelect the New Democrats under the leadership of Prime Minister Mitsotakis. Their fiscal prudence and structural reforms will be continued as voters had rewarded them with another term in office. Go long Greek versus Turkish equities.
The Reserve Bank of New Zealand hiked rates this week to 5.5%. There are many reasons to expect that to be the last rate hike for this cycle – a development that is positive for New Zealand bonds but bearish for the New Zealand dollar.
US bond investors should increase portfolio duration from “at benchmark” to “above benchmark” on a cyclical (6-12 month) investment horizon. We also recommend exiting Treasury curve flatteners and closing short positions in the February 2024 fed funds futures contract.
