It is a big mistake to think that rate cuts or lower bond yields will ease credit conditions. Quite the contrary. After an aggressive tightening of monetary policy, the first rate cuts always coincide with much tighter credit…
It is too early to know whether the drop in bond yields will offset the drag on growth from tighter lending standards. But if it does, the net effect on equity valuations could be positive. This is enough to justify a modest tactical…
The turmoil in US regional banks will weigh on economic growth. Arguably, it would be better for the broader stock market if growth slowed because banks became more conservative in their lending than if it slowed because the Fed had…
Bank failures are another ‘canary in the coal mine’ warning that a US recession is imminent, yet stocks, bonds, and the oil price are still a long way from fully pricing it.
The combination of collapsing energy inflation and cooling wage inflation means that euro area core inflation will slump later this year. We discuss the consequences.
The equity market is back to the 2019 level on an inflation-adjusted basis. However, it is still not cheap as it is not pricing in the possibility of a prolonged and deep earnings recession or a higher interest rates regime. Many…
Rather than teetering into recession, global growth has firmed since the start of the year. While we still expect inflation to decline, the risk that central banks will need to lift rates more than discounted has increased. Long-term…
China’s housing market adjustment will be protracted, causing several years of sub-par growth in the world’s second largest economy. We go through the major investment implications.
Since 1970, the track record of US housing recessions as the ‘canary in the coal mine’ for economic recessions is a perfect four out of four: 1974; 1980; 1990; and 2007. If this perfect track record continues, the current US housing…
The risk of a recession in 2023 is being supplanted by the risk of another inflation wave. We will turn more defensive on equities if it continues to look like inflation is making a comeback.