Global

It is a big mistake to think that rate cuts or lower bond yields will ease credit conditions. Quite the contrary. After an aggressive tightening of monetary policy, the first rate cuts always coincide with much tighter credit conditions. We discuss the implications for credit, government bonds and equities. Plus, we find a startling anomaly in equity sector performance.

This week’s report looks at the banking crisis within the context of shrinking dollar liquidity and implication for FX markets.

Bank failures are another ‘canary in the coal mine’ warning that a US recession is imminent, yet stocks, bonds, and the oil price are still a long way from fully pricing it.

This week’s <i>Special Report</i>, written by Miroslav Aradski, highlights the worrisome deterioration in health trends in the US, which began before the pandemic. Over the long haul, this could weigh on labor supply and productivity, put upward pressure on bond yields, and hurt equity multiples.

The combination of collapsing energy inflation and cooling wage inflation means that euro area core inflation will slump later this year. We discuss the consequences.