US Dollar

This week's Insight gauges the potential of a dollar breakout or breakdown and suggests a few trade ideas.

In this report, we explore some trading opportunities after a volatile few weeks for FX markets.

We unveil the ‘Joshi rule’ real-time recession indicator as a much better version of the Federal Reserve’s own ‘Sahm rule’. And we identify what would trigger these recession indicators in this week’s and future US jobs reports. Plus: airlines, soybeans, and tin are all good rebound candidates based on their collapsed short-term complexities.

Aggressive monetary tightening has always led to recession, although the timing is uncertain. The effects of high interest rates are starting to be felt. Investors should stay risk off and buy government bonds as a safe haven investment with carry.

Downside risks to equities are building. Rates, the dollar, and energy prices will remain elevated into yearend. This trifecta makes a soft landing less likely than before and hurts corporate profits and multiples. However, high cash balances may offer downside protection against a sharp correction.

In this Strategy Outlook, we present the major investment themes and views we see playing out for the rest of 2023 and beyond.

US fiscal, monetary, and foreign policies are unlikely to deliver any dovish surprises for investors in Q4, due to the impending government shutdown, persistent inflation, and instability among OPEC+ and China.