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Does the recent surprise rate cut by the Swiss National Bank augur other dovish surprises among major central banks in Europe?
Investors have taken comfort in the fact that unemployment has remained low in the major economies. But underneath the surface, there are clear signs that labor demand is weakening. The clock keeps ticking towards our H2 2024 recession call. After being bullish on risk assets last year, we are slowly turning more defensive.
The market’s pricing of a soft landing means that geopolitical risks are becoming more, not less, relevant in 2024. US domestic divisions will invite challenges as foreign powers rightly fear that US policy will turn more hawkish after the election.
A soft landing can be achieved but not maintained. We are cutting our tactical recommendation on stocks from overweight to neutral and scaling back our long-duration stance.