Services

We look beneath headline data to assess the state of the labor market in cyclical goods-producing industries that have previously led overall nonfarm payrolls and in the services segments that have recently been leading the charge. The bottom-up view looks a lot like the top-down view: the labor market is softening, but very slowly, and offers no indications that a recession is at hand.

Fears of a hard landing are abating as growth has been surprising to the upside. New worries are emerging, such as the trajectory of disinflation, and the pace and timing of rate cuts. In this environment, it is important to build a resilient all-weather portfolio, which protects against a correction, rising rates, or stubborn inflation but also has exposure to the AI theme.

Does the recent surprise rate cut by the Swiss National Bank augur other dovish surprises among major central banks in Europe?