Cyclicals vs Defensives

The market will eventually be forced to react to rising odds of a sharp US national policy reversal. Investors should overweight government bonds and defensive equity sectors.

The US manufacturing renaissance, spurred on by reshoring, automation, and government spending, is running its course but progress has slowed on the back of tight monetary conditions and the manufacturing recession. The deceleration of these positive trends weighs on the outlook for the Capital Goods industry group, impeding its performance over the short term. However, we reiterate that positive long-term trends for the industry remain intact. We downgrade Capital Goods to a tactical underweight. It remains a strategic overweight.

The market’s pricing of a soft landing means that geopolitical risks are becoming more, not less, relevant in 2024. US domestic divisions will invite challenges as foreign powers rightly fear that US policy will turn more hawkish after the election.

A soft landing can be achieved but not maintained. We are cutting our tactical recommendation on stocks from overweight to neutral and scaling back our long-duration stance.

Explore the eight main themes that will drive the returns of European assets in 2024.

Global Investment Strategy predicted the surge of inflation in 2021/22 and the immaculate disinflation of 2023. Now their unique framework is predicting a recession in the second half of 2024.

Democrats are favored to win the election until recession materializes. But recession risks are high. Investors should adopt a defensive and conservative strategy in 2024 amid extreme US policy uncertainty.

Our political forecasting scored wins in 2023 but we failed to capitalize on it adequately in our trade recommendations.