Financial Markets

While Chinese stocks have low valuations and are oversold, their attractiveness is dampened by uncertainties in the magnitude of stimulus and the dismal outlook for corporate profits in the next six to nine months.

Real wages are set to rise in CE3 economies with implications for their asset markets and currencies. Of the three, Polish assets and the zloty are the most vulnerable.

Magnificent Seven leadership is neither a new nor an unnatural phenomenon. There is no shortage of reasons why equities might have already made a top, but investors should not be tricked into thinking that the rally was somehow specious.

If we look at global growth as an aircraft, the plane is experiencing failing engines and will lose more altitude in the coming months. Yet, neither Chinese authorities, nor the Fed or the ECB will be quick to come to the rescue as global growth downshifts. These dynamics herald a stronger US dollar and lower EM risk asset prices.

The broader rally that started in June is premised on a Goldilocks narrative that will prove to be a fairy tale. Either by stubborn inflation. Or, by higher unemployment that shows that the war on inflation is far from costless. Or, by both. We discuss the implications for stocks and bonds. And we reveal our new top long dollar cross.

The resiliency of consumers through 2023 has surprised investors. However, consumer strength will fade into yearend as factors supporting growth in income and spending are waning. i.e., job gains are slowing, wage growth is decelerating, and excess savings are running out. Consumers are starting to feel the pressure from tighter monetary policy as financial obligations rise. Hence, as consumer spending decelerates, economic growth will slow into yearend. We confirm our underweight of the Consumer Discretionary sector.