Fiscal Policy

Markets have become obsessed with the rise of global long-dated yields. To some extent, we agree with the concern. Bonds are trading on "vibes," alarmed by the incoherent US geopolitical policy. Oil prices are obviously the conduit between that policy and the markets. On the other hand, growth is also robust. As such, bond market selloff is not all just negativity.

The one secular theme driving the bond market selloff that does not bother us all that much is fiscal policy. We see signs — including actual budget deficit data! — that the US, policymakers and voters alike, is starting to understand that there are limits to profligacy. As such, we would advise clients with a long term focus to begin nibbling at the hated bonds.

China's economy is slowing, but policymakers are unlikely to launch broad-based stimulus in H2. Meanwhile, the emergence of China's "Kimi moment" underscores Beijing's commitment to technological upgrading and the country's rapidly advancing AI capabilities.

We do not expect the oil shock to have a lasting effect on inflation. Looking further out, a variety of structural forces will influence inflation, including fiscal policy, globalization, demographics, and AI.

China's slowdown coincides with at least a minor global oil shock – a combination we have long feared.

South Africa’s commodity boost is fading, but its cyclical headwinds remain. As growth weakens and capital inflows dry up, the rand looks increasingly vulnerable to a reversal.

Markets are misreading Japan’s fiscal headlines. Our latest Insight examines what will shape BoJ policy next, when intervention might come, and the timing of a yen reversal.

Détente between China and the US is a big deal. Economic data continues to give the Fed reasons to cut. What is there to be worried about? Very little. But we chew on some bearish thoughts as we start thinking about 2026.

We give a one-third probability of a federal government shutdown. It probably will not happen before November. At worst, government shutdowns only cause temporary market volatility.