Fiscal

Looking at economic activity, global monetary policy seems restrictive, however, the behavior of financial markets tells a different story. What gives?

China is trying to export its way out of its economic slowdown while the US has already formed a hawkish consensus on foreign policy and trade. Investors should take cover as global financial markets are underrating the new phase of the trade war, which will escalate from here.

ASEAN stocks and currencies will weaken further as these economies face multiple headwinds. Raising policy rates did not stop a sliding currency in the past, it is unlikely to do so now.

Mexico’s election and the US election pose short-term and potentially medium-term risks to Mexican financial assets. But unless the ruling party wins a double supermajority, we remain structurally overweight Mexico relative to global stocks excluding the United States.

Investors should prepare for economic data to weaken even as policy uncertainty and geopolitical risk skyrocket ahead of the US election.