Trade

China missed the chance to change course on economic policy and now it faces rising social instability and western protectionism. This policy approach implies it is not afraid of escalating strategic conflicts in East Asia. Investors should continue to underweight Greater Chinese assets. Any US-China détente will come later rather than sooner.

Over the past few weeks, global equities have been hit by rising scepticism over the bullish AI narrative and increasing concerns over global growth. Stocks should stabilize in the near term, but the medium-term direction is to the downside. We expect the S&P 500 to drop to 3750 in 2025 and the 10-year Treasury yield to fall to 3%.

Republicans are favored but the election is still competitive. Equities, corporate credit, and cyclical sectors will fall until policy uncertainty is reduced.

As Trump’s victory odds rise, the underperformance of European equities deepens. How negative would a global trade war be for European assets?

Investors should overweight US assets and de-risk their portfolios in anticipation of a major increase in policy uncertainty and geopolitical risk surrounding the US election and its global ramifications.

The cyclical economy is slowing today. Republicans are now more likely to win a full sweep, crack down on immigration and trade, and at least modestly stimulate the economy. Uncertainty and volatility will rise.