Developed Countries
The S&P 500 rally broadened in July, lifting this year’s laggards. Surging long yields are altering the macroeconomic backdrop, as the market absorbs that monetary policy will stay restrictive for a long time. Yet, a move down in yields is more likely than a move up over a tactical horizon. Q2 earnings were better than expected but investors were unimpressed – the good news is already priced in. The market is overvalued and is close to being overbought, which makes it vulnerable to disappointment.
August offers an opportunity to review our key views. European growth is turning the corner and inflation is improving, but does it guarantee an imminent breakout in European stocks?
Some thoughts on this week’s bear-steepening of the Treasury curve and this morning’s employment report.
In this insight, we assess the prospect of the Swiss franc over the next six months.
