US Dollar

The US economy is in the “Overheating” phase, so stronger growth brings higher inflation. Tight monetary policy means recession is still likely over the next 12 months. Stay defensive.

In this report, we gauge the outlook for the dollar given client visits in Africa.

The economic schism in the world economy, between the non-US developed economy in recession and the US in strong growth, is unprecedented during our lifetimes. Now the schism will continue in reverse, as the non-US developed economy rebounds while the US fades. There are important implications for rates, the dollar, and sector and regional equity allocation which we discuss. Plus: base metals are a tactical short.

The death of the Iranian president reinforces our base case view of Middle Eastern instability and at least minor oil supply shocks. Rapid geopolitical developments in recent weeks are pointing to a new bout of global instability. The US is hobbled by its election. Conflicts with Russia, China, and Iran are all now escalating at the same time, at least marginally. Investors should reduce risk and shift to more defensive assets, markets, and sectors.

In this report, we review our trade recommendations based on incoming data in the last month.

Why the US could get a jobs recession without a GDP recession, as happened in 2001, and what it means for stocks and bonds. Plus, an update on the Joshi rule.

Updated views on US Treasury yields and the dollar following today’s FOMC meeting.

Wild hopes for US rate cuts got shattered, exactly as we predicted. But given the different incentives that the Fed and ECB now face, the relative pricing between the Fed and the ECB could widen further in the coming months. We discuss the implications for rates, the dollar, and the relative positioning in US versus European equities.