Trade

Our Portfolio Allocation Summary for March 2026.

The Section 122 tariffs under the US Trade Act of 1974 are more favorable to Europe; the trade-weighted tariff rate falls to 10.45%, from 11.74% pre-ruling. This positive development does not change our overall views on Europe, as we expected lower tariffs ahead of the US midterms. 

The CNY is undervalued and highly competitive. This gives China room to let the currency appreciate while remaining an export-driven powerhouse, gradually shifting from export intensity toward stronger domestic consumption. This achieves two objectives. First, it narrows the capital account deficit and strengthens the CNY’s role as a global anchor. Second, it enhances Beijing’s geopolitical autonomy by reducing reliance on foreign final demand.

This Special Report assesses evidence of RMB’s involvement in global carry trades, examines its structural characteristics, and identifies key indicators of a potential unwind.

Core inflation will get close to the Fed’s 2% target by the end of this year.

The Fed will keep rates on hold in H1 2026, but dovish policy surprises are likely in the second half of the year.

This morning’s CPI report signals that the worst of the tariff impact on inflation may already be in the rearview mirror.

US talks with Russia and China coincide with rising EU-Russia and Japan-China tensions. Stay overweight US assets and long Japanese yen. 

Indian stocks have further downside in absolute terms as profits disappoint. Their underperformance versus the EM equity benchmark, however, is late, which warrants a shift from underweight to neutral allocation.

The belief that net portfolio outflows out of the US will fuel EM assets is a common but misguided narrative. If the US starts experiencing net capital outflows, it would need to run a current account surplus. A shift in the US current account from deficit to surplus would be devastating for the global economy in general and EM in particular.