Further labor market deterioration would trigger a shift to maximum underweight in equities. While soft indicators have markedly deteriorated, hard labor data remains relatively resilient, though it has clearly weakened.…
The US-China tariff deal confirms one thing: markets are still priced for perfection, with little upside even if a recession is dodged. The London negotiations yielded a partial agreement: The US will reduce tariffs, and China will…
Colder May CPI reinforces our overweight in government bonds and tactical steepener trades as growth slows and the Fed stays cautious. Headline inflation rose 0.1% (2.4% y/y), below expectations, as did core CPI (2.8% y/y). Goods…
Mixed signals from the NAB Business Survey reinforce our underweight in Australian government bonds and long AUD exposure. In May, business confidence rebounded slightly, rising to 2 from -1, but current conditions dipped to 0 from 2…
Our Commodity strategists see a breakdown of historical commodity correlations. The US dollar now shows a positive correlation with commodities, particularly energy, and a weaker dollar will no longer guarantee upside for commodity…
While we anticipate higher inflation in June, it looks increasingly likely that the price impact from tariffs will be less aggressive and long-lasting than many feared.
Bond market volatility will spike again in the near term. The Fed is committed to an easing cycle yet the Trump administration’s signature fiscal policy action will stimulate the economy. Tariffs are supposed to keep the budget…
Small business confidence improved in May, but hiring intentions fell and activity remains sluggish, reinforcing our cautious equity stance. The NFIB Small Business Optimism Index rose to 98.8, beating expectations. However, most of…
UK labor market deterioration reinforces our overweight on Gilts and dovish BoE policy trades. Payrolls fell by 109k in May, an acceleration from the 55k revised decline for April (originally reported as -33k), and job vacancies…
For now, measures of labor market utilization (like the unemployment rate) are only gradually weakening. But we know from history that these trends have a habit of quickly accelerating in advance of recession.