Equities

Europe’s productivity growth lags that of the US. While structural factors contribute to Europe’s lower productivity level, the region’s recent lost decade plays an even greater role.

We feel as good about spurning the soft-landing narrative today as we did about spurning the recession narrative a year ago, but we are not giving into complacency. This week’s report looks at two key ways that we may be getting it wrong: by underestimating households’ asset support and the labor market’s durability. We remain tactically neutral but continue to look for opportunities to turn defensive.

Amid patchy global growth, the US economy remains resilient. However, tight monetary policy will eventually trigger a recession in the US too. The stock market rally has been very narrow. Stay underweight risk assets.

In this insight, we provide an update on the Norwegian krone, with attractive trade ideas over a long-term horizon. Shorter-term, our neutral-to-positive view on the dollar keeps us on the sidelines for USD/NOK.

Despite the economy being on the verge of a recession, the South African Reserve Bank will not ease policy meaningfully. Doing so will accentuate the currency depreciation, which, in turn, will push up bond yields – an outcome the central bank would like to prevent.

MacroQuant upgraded equities to overweight in February on a tactical short-term (1-to-3 month) horizon, but it continues to see downside risks to stocks on a medium-term (12-month) horizon. Consistent with the model’s relatively somber medium-term growth outlook, it sees more downside for bond yields on a 12-month horizon than on a 1-to-3 month horizon.