Technical

Rising stock prices and improving economic data have us re-examining our bearish thesis, but we still see deterioration in leading labor market indicators and expect it will eventually culminate in a recession. We reiterate our defensive investment recommendations.

As we head into a more turbulent macroeconomic and geopolitical period, investors should favor countries with newly elected government, small government size, and ample room to cut policy rate. Ideally, they should also be in a stable region, and not so dependent on the US or China. Hence, we are introducing the Global Political Capital Index as a way to integrate these factors into a score that can help narrow down the countries with the best and worst abilities to deal with the incoming challenges.

The Draghi report highlights sensible reforms that would address many of Europe’s productivity shortcomings. Whether European capitals heed Mario Draghi’s advices remains to be seen.

This Special Report examines the post-pandemic evolution of consumption growth, relative equity sector and subindustry performance and recent commentary from consumer-facing companies to assess the likelihood that softer spending among lower-income households will spread to middle- and upper-income households.