Inflation/Deflation
Indian EPS growth is set for major disappointments vis-à-vis the lofty expectations. Weak domestic demand amid tight fiscal and monetary policy entails more downside in stock prices. Stay underweight.
Pent-up demand for services is keeping the global economy going, but we still expect recession over the next 12 months. Investors should keep a cautious portfolio stance.
EUR/USD is trying to breach above 1.10. What is the balance of positive versus negative factors that would allow the euro to breakout?
Yen bulls need patience. The near-term narrative remains bearish on the back of interest-rate differentials. Longer term, it is the most attractive currency the G10, on valuation grounds.
Yen bulls need patience. The near-term narrative remains bearish on the back of interest-rate differentials. Longer term, it is the most attractive currency the G10, on valuation grounds.
In Section I, we discuss why the rally in stock prices over the past month reflects the soft-landing view, and why that is not a likely economic outcome. US inflation is slowing, but target inflation remains elusive. Meanwhile, cracks in the US labor market are already apparent, and there is strong evidence against the view that US stocks are appropriately priced for an eventual US recession. This underscores that conservative investment positioning is still warranted. In Section II, we check in on the indebtedness risk of several major economies, and examine whether these risks exist primarily in the household, nonfinancial corporate, or government sectors. While there are limited cyclical implications of recent trends in global indebtedness, there are several problems that will eventually “come home to roost” – particularly in the US and China.
The dollar has entered a structural bear market. Although the greenback could get a temporary reprieve during the next recession, investors should position for a weaker dollar over the long haul.
There are several widespread market narratives regarding US inflation, the Fed’s policy, global manufacturing/trade and China’s recovery that we disagree with. In this report, we explain our reasoning and where it puts us in terms of investment strategies.
No, the secular rise in geopolitical risk has not peaked. EU-China trade ties underscore the multipolar context, but this multipolarity is unbalanced, as the US has not reached a new equilibrium with its rivals. While the second quarter is murky, investors should stay defensive this year on the whole.
Today’s releases of the March CPI and March FOMC minutes do not change our view that the Fed will deliver one more 25 basis point rate increase before going on hold.