US Dollar

In this report, we review our trade recommendations based on incoming data in the last month.

MacroQuant downgraded equities from overweight to neutral on a 1-to-3 month horizon. The model maintains a neg­ative view on stocks over a 12-month horizon.

In this Strategy Outlook we examine why, contrary to popular perception, the odds of a global recession over the next 12 months are rising not falling.

The Joshi rule real-time US recession indicator remains at an elevated 0.154 versus its recession event horizon of 0.200, indicating weakening US labour demand. With the last mile of US disinflation requiring labour demand to ‘catch down’ with labour supply, investors should watch the Joshi rule very closely to pre-empt a potential tipping-point. Plus: tactically long Portugal versus Europe, and wheat versus cotton; and tactically short USD/CLP, Qualcomm (QCOM), and Salesforce (CRM).

Presently, our four high-conviction themes are: (1) the US dollar will rally as US growth continues to outpace the rest of the world; (2) US equities will continue to outperform EM and European stocks until a major sell-off occurs; (3) a US profit margin squeeze is imminent; (4) EM domestic bonds and sovereign USD bonds are due for a setback.