Developed Countries
The US labor market appears balanced but at a pivotal point, with further weakness likely to prompt a shift to maximum defensiveness. After running the hottest since the 1960s, the labor market has gradually cooled. That rebalancing sparked a brief growth…
The S&P 500 has breached 6000 and may retest all-time highs, but we would not recommend chasing the rally. Risk assets have shrugged off recession fears, with stress indicators like the VIX, SKEW, and VVIX still subdued, signaling limited demand for…
Further labor market deterioration would trigger a shift to maximum underweight in equities. While soft indicators have markedly deteriorated, hard labor data remains relatively resilient, though it has clearly weakened. The labor market is still in…
Colder May CPI reinforces our overweight in government bonds and tactical steepener trades as growth slows and the Fed stays cautious. Headline inflation rose 0.1% (2.4% y/y), below expectations, as did core CPI (2.8% y/y). Goods inflation was flat, and…
Mixed signals from the NAB Business Survey reinforce our underweight in Australian government bonds and long AUD exposure. In May, business confidence rebounded slightly, rising to 2 from -1, but current conditions dipped to 0 from 2. Profitability continued…
Our Commodity strategists see a breakdown of historical commodity correlations. The US dollar now shows a positive correlation with commodities, particularly energy, and a weaker dollar will no longer guarantee upside for commodity prices. Softening global…
The US-China tariff deal confirms one thing: markets are still priced for perfection, with little upside even if a recession is dodged. The London negotiations yielded a partial agreement: The US will reduce tariffs, and China will remove export restrictions…
While we anticipate higher inflation in June, it looks increasingly likely that the price impact from tariffs will be less aggressive and long-lasting than many feared.
Bond market volatility will spike again in the near term. The Fed is committed to an easing cycle yet the Trump administration’s signature fiscal policy action will stimulate the economy. Tariffs are supposed to keep the budget deficit contained but they are inflationary.
Small business confidence improved in May, but hiring intentions fell and activity remains sluggish, reinforcing our cautious equity stance. The NFIB Small Business Optimism Index rose to 98.8, beating expectations. However, most of the improvement came from…