Economic Growth

Modi and the BJP are at or near the peak of their political dominance, and their third term will be challenging as they must deal with harder reforms amidst a slowing domestic and global economic environment. In the long run, however, we remain constructive on India’s prospects, as its geopolitical and economic positioning are favorable and improving.

We marked the first X on our Equity Downgrade Checklist and the latest JOLTS, Employment Situation and SLOOS releases brought us closer to ticking some others. We remain tactically neutral on equities but expect that we will underweight them as excess savings are further depleted, leading labor market indicators continue to soften and consumer credit performance continues to fray.

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.