Economy

The Fed held rates steady this afternoon, and the timing of its next move will be dictated by whether the tariff shock to inflation is transitory or more long lasting.

Negotiations on trade, Iran, and Ukraine will prove critical this month. Markets will remain volatile because positive data surprises enable the White House to press its hawkish tariff hikes, while negative surprises force the White House to backpedal. 

We apply our systematic approach to investing based on economic, inflation, and monetary policy surprises to the major global bond markets. The economic regimes defined by the current macro-surprises setup confirm our existing fixed-income portfolio tactical recommendations.

This week’s report looks at Japan, with the recent BoJ meeting. While a trade war has injected uncertainty into the Japanese economy, our conviction remains high that JGBs will underperform other government bond markets, and the yen will ultimately rally. That said, JPY is due for a tactical pullback.