Economy
While it is impossible to know exactly when global equities will peak, there are now enough vulnerabilities to justify keeping one’s finger near the eject button.
August US CPI was in line with expectations, reinforcing the case for Fed easing and a long-duration stance. Headline CPI rose 0.4% m/m (2.9% y/y), while core held at 0.3% m/m (3.1% y/y). Core goods inflation ticked up to 1.5% y/y from 1.1%, while services…
The ECB left policy unchanged in September, reiterating a data-dependent stance and signaling no urgency to ease. Markets barely reacted, consistent with a fully discounted decision. The Governing Council appears confident in a soft landing, making a December…
High US inflation is being driven by tariffs, not domestic inflationary pressure. This argues for Fed easing and a bull-steepening of the Treasury curve.
China’s August inflation data confirm entrenched deflation, reinforcing our overweight in onshore bonds and a tactical long in onshore small- and mid-caps versus large caps ahead of potential stimulus. Producer prices declined 2.9% y/y, easing from…
August PPI inflation cooled, reinforcing the case for Fed easing and long duration with steepeners. Headline PPI fell 0.1% m/m, bringing the annual rate down to 2.6% after July’s 0.7% gain. Core PPI (ex-food, energy, and trade) rose 0.3% m/m (2.8% y/y).…
European sentiment continues to weaken, reinforcing the tactical case for US outperformance over Europe. The September Sentix Investor Confidence index fell to -9.2 from -3.7, defying expectations for an increase and signaling that August’s deterioration is…
Core Europe’s industrial sector will relapse in the coming months due to US tariffs and a strong euro. Investors can play the imminent deflationary shock by being long Central European bonds. They should, however, hedge the currency risk vis-à-vis the euro.
USD-denominated Emerging Market bonds have been outperforming US corporates for the past year. We don’t think the rally is exhausted yet.
Australia’s NAB survey shows underlying resilience, reinforcing our underweight on ACGBs and the case for AUD flatteners vs. CAD steepeners. The August survey was mixed, with current conditions improving to 7 from 5, while business confidence softened to 4…