Government

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. 

President Trump faces new restrictions on his trade powers coming from the US judicial branch, but they will not prevent him from continuing to restrict trade and investment with China. Rather, they will establish some curbs against entirely arbitrary executive tariffs, especially when wielded against US allies and partners.

This Insight looks at the implications of the RBNZ’s rate cut on New Zealand assets. 

The easing bias remains, but not all central banks are equal. This Central Bank Monitor update reveals who is ready to cut more and who is still pretending not to.

Short-term pain from Trump-related concessions, fiscal tightening amid a US and Mexican slowdown, and rising labor slack will weigh further on Mexican assets. But long-run, policy direction will capitalize on the nearshoring trend and resume the trend of Mexican asset outperformance relative to other emerging markets.

Negotiations on trade, Iran, and Ukraine will prove critical this month. Markets will remain volatile because positive data surprises enable the White House to press its hawkish tariff hikes, while negative surprises force the White House to backpedal. 

We apply our systematic approach to investing based on economic, inflation, and monetary policy surprises to the major global bond markets. The economic regimes defined by the current macro-surprises setup confirm our existing fixed-income portfolio tactical recommendations.