UK

The BoE is easing, but risks falling behind. Labor and growth cracks are starting to emerge, and the Bank may soon be forced to move more decisively. This report outlines why gilts remain a buy and sterling’s path is diverging vs. USD and EUR.

Disinflation continues to unfold globally, and markets are finally catching up. Inflation expectations have broadly realigned with fundamentals, prompting us to shift our global ILB allocation to neutral. While tariff risks are inflating US expectations, pricing in the UK, Japan, and Australia has adjusted sharply. Today’s Strategy Report reviews these developments and updates our country-level ILB positioning.

In this chartbook, we look at the balance of payments across DM and EM countries. The US does not fare well, but neither do a few other countries.

Acute geopolitical risks, like a massive oil shock, may be abating. But structural geopolitical risk remains high and could upset a blithe market. Cyclical economic risks are underrated as the US slows down and China continues to stumble. Investors should book some profits in anticipation of tariff implementation and a downturn in hard economic data.

This week our three screeners explore: UK stocks that are cheap and offer a geopolitical hedge; French stocks that are sensitive to China; and US Value and dividend paying stocks. 

Investors should modestly underweight equities in their portfolios and look to turn more aggressively defensive once the whites of the recession’s eyes are visible. We think that will happen within the next few months.