Inflation/Deflation
Our Central Bank Monitors support the recent shift in tone from central bankers in Europe. Find out what it means for European fixed-income portfolio allocation.
Ironically, increased confidence that the economy can withstand higher bond yields may be necessary to lift yields to a level that is actually detrimental to growth. Thus, until more investors are convinced that a recession will be averted, a recession will be averted. Remain tactically bullish on stocks for now. A more defensive posture will likely be necessary later this year.
In this Strategy Insight, we go over the RBA’s recent decision and the implications of its hawkish message for AUD trades.
The Fed is betting that the usual non-linearity of unemployment is different this time, but so far, there is nothing to suggest that it is different. We discuss the key signposts to watch out for, plus the implications for interest rates and asset allocation.
In this Strategy Insight, we go over the RBA’s recent decision and the implications of its hawkish message for AUD trades.
Financial markets were taken on a wild ride between Wednesday and Friday of this week, with hugely important monetary policy meetings in the US, euro area and UK along with a rash of economic data. Despite all the news, noise and market volatility, the underlying message for monetary policy and bond yields in the US, euro area and UK is unchanged.
The ECB and the BoE provided a comforting signal to markets that the end of the respective tightening campaigns is coming before the summer. In the process, they are closing their hawkishness gap relative to the Fed.
The US economy will experience a period of benign disinflation over the next few quarters. Beyond this goldilocks period, either the economy will slip into a mild recession in 2024, or more ominously, a second wave of inflation will prompt the Fed to slam on the brakes, leading to a deep recession.
This US Bond Strategy Insight discusses what we learned from yesterday’s FOMC meeting and press conference, and discusses the implications of the market’s reaction.
President Biden’s political capital has fallen as he enters a challenging year that will include a domestic faceoff with the House Republicans and foreign crises stemming from China, Russia, and Iran. Stay defensive and prefer bonds over equities.