Monetary

MORENA has once again swept the Mexican election: Claudia Sheinbaum will be president, with little to no constraint in Congress. All in all, Mexican politics will remain stable and overall supportive of markets. In the medium term, fiscal spending will return to conservatism and the constitutional reforms will lead to mixed fiscal and economic repercussions. In the long term, however, fiscal and institutional risks will rise. We advise investors to remain overweight Mexican risk assets relative to EM in cyclical and structural time horizons, but prepare for Mexican markets to sell off in absolute and relative terms in the next couple of months.

Our Portfolio Allocation Summary for June 2024.

We comment on whether Treasury market valuation is sufficiently attractive to get long bonds and consider some of the common arguments for why yields may yet make new highs.

Looking at economic activity, global monetary policy seems restrictive, however, the behavior of financial markets tells a different story. What gives?

The signs of an approaching recession are starting to emerge. We will turn tactically defensive once they all fall into place.

China is trying to export its way out of its economic slowdown while the US has already formed a hawkish consensus on foreign policy and trade. Investors should take cover as global financial markets are underrating the new phase of the trade war, which will escalate from here.