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 investment strategy and focused on some of the possible surprises for 2024, particularly in terms of global trade and bellwether manufacturing indexes. Global investors tend to put a lot of importance (too much!) on PMI manufacturing indexes. Regardless, after a difficult past 12-18 months, even these indexes have started to creep up, although the increase has not yet been sufficient to boost global economic expectations, nor unnerve bond bulls and DM central banks.
We expect further strengthening in both global trade and manufacturing activity. Thus, we have bonds on downgrade alert – stay tuned.