Research Highlights

A just-published report updated our investment recommendations in view of the U.S. election outcome and ongoing DM policy rate cuts. We remain moderately pro-growth, with the U.S. economy still enjoying solid momentum and with increasing prospects for an improvement elsewhere as monetary conditions ease further. Investors bought “America” last week, in anticipation of an even……

The U.S. economy has solid momentum heading into this week’s election. Whether the next President and Congress decide to pursue more aggressive protectionist policies and risk a stagflation outcome is difficult to handicap. However, investors will need to closely monitor actual political actions and avoid getting too wrapped up in rhetoric and negotiation tactics. If……

A just-published report was the latest in a series of reports this autumn on the capital markets impact of the upcoming U.S. election. The reports examined a wide range of potential policy changes depending on the election outcome. With just over a week to go, the race for the White House remains close. Former-President Trump……

A just-published report updated our views on global asset markets and macro trends. While one is never supposed to claim that “it is different this time”, this has clearly been the case this cycle: U.S. financial conditions have diverged meaningfully from policy rates since the Fed began hiking in 2022, which has been supportive of……

A just-published report updated our outlook for the U.S. Treasury market and Fed policy in the near run and on a 6-12 month basis. While the Fed is still intent on lowering its policy rate, we anticipate that economic and inflation trends will force still aggressive rate-cutting expectations to steadily unwind. The expected march to……

A just-published report pointed out the significant divergences between growth expectations and bond spreads between the euro area and U.S., divergences which will likely cause spreads to further widen. Early signs of divergence are also beginning to appear in forward markets. There is room for the ECB’s dovish rhetoric to be sustained in the near……

A just-published report updated our absolute return positions in the MRB TradeBook, which remain mildly pro-growth and pro-risk. Global monetary conditions have not been restrictive as is generally believed. Nonetheless the major central banks are providing additional reflation and have signaled that a lot more looms. The result will be a significant extension to the……

The Fed started its rate-cutting cycle with a bang last week, even as signs of above-potential economic growth persisted and asset inflation is flourishing. While the BoJ is headed in the opposite direction, it is only normalizing policy at a glacial pace, and the aggregate DM policy rate is expected to meaningfully decline over the……

A just-published report updated our view on the U.S. inflation outlook after a high-side miss for the core inflation rate in the August CPI report. Aside from the unwinding of pandemic-related distortions, it has ironically been immigration more than restrictive Fed policy that has brought down services inflation and raised the unemployment rate. The increase……

A just-published report updated our view on the U.S. inflation outlook after a high-side miss for the core inflation rate in the August CPI report. Aside from the unwinding of pandemic-related distortions, it has ironically been immigration more than restrictive Fed policy that has brought down services inflation and raised the unemployment rate. The increase……

A just-published report updated our absolute return portfolio which remains mildly pro-growth, as risk-on is likely to persist until bond yields head north. Financial markets have a way of frustrating the greatest number of investors when there is a strong consensus. To this end, after chronically and aggressively front-running the Fed rate-cutting cycle in recent……

Fed Chair Powell forcefully stated that U.S. rate cuts are now coming in his Jackon Hole speech on Friday, only the magnitude and specific timing is uncertain. A just-published report reiterated our pro-growth investment stance, highlighting that the risk-on phase will persist until bond yields reverse course, which is not imminent with the Fed set……

A just-published report reiterated our mildly pro-growth investment stance. We remain more upbeat on the global economic outlook than the consensus (and some days it feels like we are way more upbeat!), expecting solid growth ahead with sticky DM inflation. One unique feature of this decade’s rate-hiking cycle has been the persistent and increasingly aggressive……

A just-published report highlighted a number of insightful U.S. employment indicators that underscore that the labor market is not deteriorating. Rather, employment trends are still just cooling from the unprecedented levels recorded during the post-COVID reopening “boom”. Importantly, the conditions that would herald a recession and profit downturn are not being signaled: layoffs continue to……

A just-published report noted that the Fed will soon match most other DM central banks and start lowering its policy rate (the notable expectation being the BoJ). Following Friday’s less than expected U.S. payroll gain, a September rate cut is assured, with another cut or two after the election. The report provided our outlook for……

A recent report argued that a lot of the juice had already been squeezed out of EM debt, and that investors should temper their return expectations for the asset class. Nevertheless, the improving global trade cycle will still outperformance both EM local currency and hard currency debt within a global fixed income portfolio. Nevertheless, it……

Immigrants sometimes get blamed for things that go wrong in a country, but there is some truth to the fact that a surge in new immigrants has provided a misleading bearish U.S. economic signal. A just-published report examined the details behind the rise in U.S. unemployment and found that, indeed, this time is different. In……

A just-published report highlighted some significant distortions in the U.S. equity market, which we expect will unwind going forward. For instance, equity market leadership normally narrows when credit spreads widen, and vice versa. This inverse relationship makes intuitive sense since narrow credit spreads typically reflect healthy economic and corporate fundamentals whereas widening credit spreads are……

A just-published report updated our multi-asset portfolio recommendations, which remain mildly pro-growth. The underlying macro backdrop is broadly supportive for risk assets, but overheated tech stocks, tight credit spreads and policy uncertainty in the U.S. and euro area, imply choppiness in the near term. The earnings outlook remains positive for stocks, which historically has correlated……

Two reports last week examined global equity market prospects and concluded that conditions outside the U.S. were improving, opening the door to some promising investment opportunities. One report updated our view on the major global equity markets, and reiterated our overweight stance on the euro area, EM (especially EM ex-China) and Japanese equities within a……

A just-published report updated our view on Fed policy subsequent to the latest FOMC meeting. The Fed has been waiting for some milder inflation data to support its plans to reduce the policy rate this year. The soft core CPI print in the May report provided some respite after a string of strong inflation reports……

Last week’s report updated our view on how monetary policy is likely to evolve in the euro area and the related investment opportunities over the next 6-12 months. The ECB is set to reverse course and cut rates next week, based on what is discounted in the forward markets. However, the case for ECB rate……

A just published report updated our view on how monetary policy is likely to evolve in the euro area and the related investment opportunities over the next 6-12 months. The ECB is set to reverse course and cut rates next week, based on what is discounted in the forward markets. However, the case for ECB……

A just published report updated our investment outlook, which hinges in the near run on a continuation of a calm bond market. The global economic backdrop is both improving and broadening, at a time when there is little DM economic slack. This combination warns that another upleg in DM bond yields is inevitable. However, in……

A just published report updated our forecast for the U.S. consumer sector, by examining the drivers of spending. Economic bears frequently highlight that the increased cost of borrowing and apparent depletion of the household sector’s pandemic-period excess savings will meaningfully slow consumption. We strongly disagree. U.S. households have saved more than 8% of their income……

A just published report noted that the recent rally in Chinese stocks has lacked improving forward earnings. The good news for stock bulls is that this divergence is not expected to persist. We expect earnings momentum to improve over the balance of the year, in line with solid economic momentum. Chinese economic growth will remain……

A just published report updated our asset allocation and investment recommendations. A broadening and strengthening in the global economic expansion will ensure that the uptrend in corporate profits persists. The downside of this outcome is that DM inflation will remain sticky, and above most central bank targets, especially in the U.S. Consequently, while the Fed……

A just published report noted that this year’s U.S. presidential election will be decided by a handful of “swing states” that are currently viewed as “toss ups” given their recent election history, demographics and political orientation. The election will be unusual in many ways, with the outcome driven by the extreme polarization of the American……

A just published report updated the MRB TradeBook which contains our absolute return positions. We have been pro-growth since last autumn, but recently tightened stops as the Goldilocks backdrop was expected to end once the rebound in bond yields gained momentum. The Goldilocks environment began in 2023 Q4 with the Fed’s dovish pivot, which led……

A just-published report examined the deteriorating outlook for U.S. inflation. Last year’s steady deceleration has given way to a meaningful rebound in underlying inflation, based on the last three CPI reports. Our analysis showed that inflation’s recent pickup cannot be solely pinned on one-off/reversible factors, and underscored our view that the underlying trend of U.S…….

A recently published report updated our global multi-asset investment recommendations and highlighted the mounting near-run risks as investors have become exuberant in the face of improving global growth, still easy financial conditions and the “promise” of approaching DM policy rate cuts. The global stock/bond ratio has soared recently, and conditions are getting overbought. A consolidation……

A recently published report updated our fixed-income recommendations and strategies. In contrast with the prevailing consensus, we believe that the risk for developed market (DM) bond yields is still skewed to the upside over the next year. In fact, additional monetary tightening may well be needed to truly return DM, and especially U.S., inflation to……

A just-published report updated how we expect U.S. monetary policy to evolve in the next 6 to 12 months. Needless to say we foresee a further unwinding of rate cut expectations and for the Fed to eventually be forced to reverse its dovish pivot. Despite a stronger growth and inflation outlook, the Fed stuck to……

A just-published report highlighted that easing financial market conditions at a time of rising corporate earnings have created a fertile backdrop for risk taking. And, indeed, investors have acted accordingly, helping to spark a huge run-up in risk asset prices and a surge in the global stock/bond ratio. The peak in Treasury yields last October……

A just-published report updated our investment strategy, which has benefited considerably from the risk-on phase that developed last autumn. We added three new positions and tightened stops on some winning recommendations within the MRB TradeBook. Equities and other risk assets have rallied because investors realized that they were too cautious on expectations for a soft-landing……

A just-published report highlighted the surging global stock-to-bond total return ratio, which has reflected a combination of improving global growth momentum, rising 12-month forward earnings expectations and higher bond yields. The ratio is approaching overbought conditions, but the strength of the global stock-to-bond ratio in large measure reflects the narrow and huge outperformance of a……

A just published report reviewed our investment strategy and the mounting evidence that inflation in the developed world is proving sticky. In addition, the report updated our research on the U.S. commercial real estate market given renewed angst about falling prices and the related stresses impacting the banking system. The key points from our analysis……

A just-published report reviewed our investment strategy and the mounting evidence that inflation in the developed world is proving sticky. In addition, the report updated our research on the U.S. commercial real estate market given renewed angst about falling prices and the related stresses impacting the banking system. The key points from our analysis were:……

Last autumn we noted that there were preliminary signs that the global trade cycle had troughed. Recent trade data and key gauges from two leading economies, Korea and Taiwan, decisively confirms that indeed a decisive turn has occurred. Market action, however, suggests that investors have not yet embraced the revival. A just-published report updated our……

A just-published report updated our view that DM government bond markets and central banks have been mirroring the macro environment of the 1980s, only in reverse. Understanding the evolution of investor perceptions and bond market pricing during that decade, when the secular inflation trend was reversing, has already proven valuable for investment returns in recent……

Fed Chair Powell pivoted last autumn, claiming that monetary policy had become restrictive. This triggered a rush to discount aggressive rate cuts in 2024. The U.S. economy was in the midst of a powerful burst of growth during the second half of 2023, and thus risk asset markets also pivoted aggressively, with stock prices racing……

A recent report argued that global financial asset markets entered 2024 riding a wave of optimism about a “soft-landing” for the U.S. economy, together with high expectation for aggressive rate cuts by the Fed and most other developed market central banks. Instead, the recent dramatic easing in aggregate monetary conditions is reinforcing the reacceleration of……

A just-published report updated our investment strategy, and noted that an important inconsistency was building: investors are betting that profit growth will strengthen and at the same time they expect a sizable decline in DM policy rates. Such a combination is unlikely, or at least unlikely to be sustained for very long. One or the……

A just-published report noted that after their big year-end run-up, capital markets are priced for a near-perfect economic and inflation outcome. While the macro backdrop of steady global economic growth, falling inflation and anticipated central bank rate cuts will be positive for both stocks and bonds, it is already discounted in asset prices. One consequence……

A just-published report highlighted that the Fed is on track to commit yet another mistake with regards to underestimating inflation. Last Wednesday’s FOMC meeting marked a meaningful pivot in the Fed’s policy stance, as the Fed clearly signaled that it is considering easing policy. It is not anticipating a recession, but the Fed believes that……