Policy

Europe is about to become President Trump’s next target. The good news: a US/EU trade war will be short as common ground to achieve a deal exists. The bad news: European assets remain at the mercy of heightened uncertainty. How should investors position themselves in this tricky context?

Some thoughts on this morning's employment data and Treasury Secretary Bessent's recent attempts to talk down the 10-year Treasury yield.

Following today’s Bank of England’s policy meeting, at which the policy rate was cut by 25 bps, we discuss our outlook for monetary policy in the UK. We expect the gradual easing to continue and discuss the investment implications for UK gilts and sterling.

Our Portfolio Allocation Summary for January 2025.

This is a follow-up report on Bessenomics – the policy mix that US Treasury Secretary Scott Bessent plans to pursue. The direction of US and global financial markets depends on the amount of fiscal tightening required to bring down US interest rates. Can the Trump administration cut fiscal spending just enough to bring down US bond yields but not cause a recession?

Markets and forecasters anticipate a “Golden Age” for Trump’s America, with US growth expectations soaring while the rest of the world lags. However, this extreme optimism means that there is a lot of room for disappointment. Cooling income growth, weak housing and less deficit spending than expected will result in US growth underperforming expectations. Maintain a modest underweight to equities and modest overweight to fixed income. US markets have become more expensive relative to the rest of the world even as quality differentials have stabilized. Prepare to downgrade US equities to underweight and to upgrade Euro Area and China to overweight. We will wait to pull the trigger until we have more clarity on trade policy and when the dollar's momentum turns negative.