Secession/Breakup

The Fed is sending signals that another rate hike is coming, despite sluggish U.S. growth and modest inflation, while both the ECB and BoJ are facing questions about the ability to maintain the pace of bond purchase programs. Amidst all this uncertainty, bond risk premiums can rise further in the near term.

A collection of 10 important charts to monitor closely through the summer months.

The 35-year bond bull market is coming to an end and the downward sloping trend channel for yields is changing to flat. Asset allocators should trim duration and fixed income exposure.

Highlights The U.K. has a new Prime Minister - former Home Secretary Theresa May - who has committed her cabinet to pursue a divorce from the EU. With the government in London now falling inline with the mantra that "Brexit means Brexit," is there no hope…

Given that the seemingly unthinkable can actually happen, we reassess how financial markets price uncertainty, and whether the current pricing is correct.

Signs that the median voter is moving to the left are everywhere. Markets will cheer the move as it means more government spending. In the long term, it depends if policymakers stop at fiscal stimulus. In this <i>Monthly Report</i>, BCA's <i>Geopolitical Strategy</i> reviews prospects for "Bremorse," latest in the U.S. election, Italian political crisis, tensions in South China Sea, and the long-term future of Europe.

We test three channels of contagion from the Brexit shock: political, banking system, and economic.

Yield and Protector Portfolios should continue to benefit in current environment. Equities face seasonal headwinds.

A benchmark overall duration stance is still warranted, as central banks will maintain exceptionally accommodative monetary policies to offset potential Brexit-related shocks to confidence.

The Brexit vote will either usher in the complete dissolution of the euro area, or it will prove to be a blessing in disguise. Our bet is the latter, but the next few months are still likely to see heightened political uncertainty and elevated financial volatility, warranting a cautious stance towards risk assets. Investors have become too complacent about the prospect of Fed hikes over the coming years. Even a slight upward move in rate expectations could cause the dollar to surge. Underweight U.S. stocks in currency-hedged terms.