UK

Given the meetings between the Bank of Japan, the Bank of England, and the Swiss National Bank, our highest convictions views are:
Overweight UK Gilts. It is also time to sell sterling. We are short sterling, as of 1.30. 
Underweight JGBs. Correspondingly, be long the yen. 
A short CHF/JPY position remains a core holding. Selling GBP/JPY is also a great trade.

The US (and the UK) is staring down the barrel of a ‘mini-stagflation’ until a deflationary shock arrives to neutralise it. We describe a likely source for the deflationary shock and list three investment conclusions that are valid irrespective of how long it takes for the deflationary shock to arrive. Plus: RCI.B is deeply oversold and ripe for a rebound.

We are at a pivotal moment for Europe, supported by structural reforms and macro catalysts. While expanding credit markets and lower rates favor Private Equity over Private Credit, opportunities vary by segment. Large+ Buyouts are attractive as markets have priced in structural challenges. We downgrade Europe Private Credit, remain neutral on Europe Private Equity broadly but overweight Europe vs. North America in PE portfolios.

Questions about fiscal risks and their impact on bond markets have become more frequent in client conversations. This Special Report provides a framework to assess a country’s fiscal sustainability and how it affects its bond market outlook. On an individual country basis, Spain has shown a remarkable turnaround in its fiscal sustainability outlook while the fiscal outlook for France continues to deteriorate.

Following today’s Bank of England’s policy meeting, at which the policy rate was cut by 25 bps, we discuss our outlook for monetary policy in the UK. We expect the gradual easing to continue and discuss the investment implications for UK gilts and sterling.

While the US economy could remain upright on the tightrope for a while longer, it will inevitably fall, leading to a major bear market in stocks. We will be looking to our MacroQuant model for guidance on when to turn fully defensive. We are not there yet.