Currencies
Why the US could get a jobs recession without a GDP recession, as happened in 2001, and what it means for stocks and bonds. Plus, an update on the Joshi rule.
Mainland residents’ investments in gold, other metals, and Hong Kong-traded stocks are a form of capital outflow. Chinese authorities will counter any excessive capital flight with stricter administrative controls. Thus, markets benefiting from these flows will likely be hurt.
Updated views on US Treasury yields and the dollar following today’s FOMC meeting.
Wild hopes for US rate cuts got shattered, exactly as we predicted. But given the different incentives that the Fed and ECB now face, the relative pricing between the Fed and the ECB could widen further in the coming months. We discuss the implications for rates, the dollar, and the relative positioning in US versus European equities.
Central banks are in a dilemma whether to prioritize supporting growth or bringing inflation back to target. This is unlikely to end well. Investors should be defensively positioned.
MacroQuant downgraded equities from neutral to underweight on a 1-to-3 month horizon. The model suggests increasing exposure to cash.
