United States
Markets are pricing out the worst trade policy fears, and while tariffs will still dent earnings, the impact looks smaller than initially feared. With sector rotation gaining traction and oversold names rebounding, we are adjusting our portfolio to reflect the rotation thesis.
A weakening economy will apply downward pressure to Treasury yields, but the Trump term premium will keep long-dated yields higher than they would otherwise be. This makes Treasury curve steepeners the most attractive trade in US fixed income.
Utilities remain a long-term structural investment theme thanks to the tailwinds from GenAI, EV, and onshoring. However, there is little upside left over the tactical investment horizon as all the positives are priced in. We close our overweight and book profits.
The easing bias remains, but not all central banks are equal. This Central Bank Monitor update reveals who is ready to cut more and who is still pretending not to.
It may take several months for the tariff shock and policy uncertainty to filter through the real economy, but survey-based data are already sending a warning. Equities have priced in a lot of good news, and investors are too sanguine about the risk of a US recession.