Economy
To produce a moderate economic recovery, at least RMB 3 trillion in additional government expenditures is needed in H1 2025. Our bias is that Beijing is not yet ready to launch such a massive fiscal support measure. Hence, volatility-adjusted equity returns in China will be poor.
This week, we cover the main questions we fielded during our latest client trip in Europe. Among the many topics broached are Europe’s recession odds, the impact of China’s stimulus, and the outlook for European markets.
Rising stock prices and improving economic data have us re-examining our bearish thesis, but we still see deterioration in leading labor market indicators and expect it will eventually culminate in a recession. We reiterate our defensive investment recommendations.
In this Insight, we assess whether investors should expect fiscal turbulence in the UK, that will drive UK yields higher and the pound lower.
It is too early to say that the US labor market has turned the corner. We assign a 60% chance that the US will enter a recession over the next 12 months, with the downturn likely to begin in the first half of 2025. Accordingly, investors should underweight equities.
We give our thoughts on this morning’s CPI release and (lack of) market reaction. We also close our short position in January 2025 fed funds futures.
