Developed Countries

European stocks have massively underperformed US ones since the GFC. Demographics and productivity say this trend will continue, but is that really so?

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.

Generative AI-related rally resumed in May. Much of the recent market gains are down to excess liquidity that was begotten by the massive pandemic stimulus, creating a dichotomy between multiple economic challenges and exuberant markets. The Fed is unlikely to step in to prevent the bubble as it is currently more worried about the near-term downside for growth than financial stability.

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

MacroQuant sees significant downside risks to stocks over a 1-to-3 month horizon and suggests increasing allocation to long-term bonds. The model favours defensive equity sectors but is also hedging its bets by overweighting materials.

Democrats remain slightly favored for the White House because they are the four-year incumbent presidential party and the economy is not in recession. But if the unemployment rate rises in the lead up to November, then Biden and Democrats will become disfavored regardless of Trump’s convictions.

We comment on whether Treasury market valuation is sufficiently attractive to get long bonds and consider some of the common arguments for why yields may yet make new highs.