Economy

Italy is no longer Europe’s problem child. Investors will be better off reassessing their views of Italian assets, which represent a buying opportunity on a structural time horizon.

The global economy is wobbling precariously between slowing growth and reaccelerating inflation. This is unlikely to end well. Stay cautious, and hedge against both recession and inflation.

In this Insight, we discuss our rationale for a short sterling position.

Investors around Europe and North America are concerned that the stock market is increasingly overbought and vulnerable to exogenous risks. We agree and have good reasons to fear that festering geopolitical risks and the US election season will deal negative surprises.

We expand our risk/reward analysis of US investment grade corporate bonds to focus on the 44 industry groups included in the Bloomberg index.

Inflationary pressures this year will remain subdued as labor-productivity growth – driven by strong capex and R+D spending – continues. This will make the Fed more confident in beginning its policy-rate-cutting cycle in June, and will keep gold well bid. We are raising our gold target to $2,300/oz. We continue to expect no recession this year.