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Safe Havens Other Than the USD
April 17, 2025 8:30 AM UTC
The USD and U.S. Treasuries are currently not acting like safe havens, as the crisis is U.S. centric with the tariff debacle. 10yr Treasuries can regain safe haven status if a U.S. recession occurs, but U.S. equities are still clearly overvalued versus equity and equity-bond metrics. We prefer Ind
U.S./China High Stakes Poker
April 14, 2025 7:30 AM UTC
The economic hit from a hard stop in U.S. imports/exports is too damaging for both sides and our baseline is still for a truce and de-escalation, in the coming weeks. This could be negotiations on a new trade deal with a more moderate reciprocal tariff on both sides and the extra reciprocal tariffs
Nervous U.S. Long Term Asset Holders
April 15, 2025 8:30 AM UTC
Overall, foreign equity investors can no longer count on U.S. exceptionalism and could face lower long-term corporate earnings growth, which at a minimum will likely slow net inflows. Bond investors also face ongoing policy volatility, which likely means a need for an extra risk premium – t
USD Rebalancing: Some to EM?
April 24, 2025 8:30 AM UTC
Some portfolios rotations towards EM assets will likely be evident, as we see the USD decline is now extending and broadening. However, flows will likely be selective, both given underwhelming EM performance in the last 5-10 years and the uncertainty over how much Trump will reduce reciprocal tari
Trump Under Pressure
April 23, 2025 7:15 AM UTC
A deteriorating economic; volatile financial markets and weakening approval ratings are all putting pressure on the Trump administration to do trade deals. However, Trump instincts means he still likes tariffs, while negotiations will not be quick with China restraints and non-tariffs list desired
U.S. Q1 GDP dips, Imports surge goes into inventories and business investment
April 30, 2025 1:07 PM UTC
The 0.3% decline in Q1 GDP is in line with expectations that were downgraded from a marginal increase after yesterday’s sharp rise in March’s advance goods trade deficit. A 3.5% rise in the core PCE price index is stronger than expected. While the Q1 data does not tell us very much about Q2, the
Tariff Man
May 6, 2025 8:45 AM UTC
With the U.S. equity market having rebounded, President Donald Trump instinct on tariffs have seen threats of pharma tariffs and a 100% tariff on non U.S. films. Slow progress is also reported on bilateral deals, despite White House PR spin. However, Trump will see pressure rising from three so
The Hope for A Peace Deal in Ukraine Seems No Close
April 28, 2025 12:55 PM UTC
Bottom Line: We have lowered a Russia-friendly peace deal following a cease-fire to 50% probability but have increased the alternative scenario of war continues to 50% probability in Ukraine as negotiations to end the war in Ukraine continue slowly. In the former scenario, we envisage Russia will co
Foreign Official U.S. Treasury Holders: The Kindness of Strangers
April 22, 2025 7:30 AM UTC
Official holdings of U.S. Treasuries show a mixed picture with China, Brazil and Saudi Arabia well off peak holdings. Two drivers of some of these country flows are the peak in global central bank FX reserve holdings in 2021 and an increased holdings of other currencies in the last decade. Neverth
ECB Review: Discussing Policy Restriction No Longer Appropriate
April 17, 2025 1:48 PM UTC
A seventh and widely expected 25 bp deposit rate cut was overshadowed by the ECB’s communication shift about the outlook hereafter, no longer talking about how restrictive policy may be. This shift is entirely appropriate not least given the manner in which financial conditions are now tightenin
Trade Deals with the U.S.: Pressures and Obstacles
April 10, 2025 7:17 AM UTC
Pressures to do trade deals include the weaker U.S. economy and higher inflation when it arrives/foreigners becoming nervous of their USD30trn plus holdings of U.S. securities and more crucially risks to Trump and GOP approval ratings from Republican voters. Obstacles to quick trade deals include Tr
Deterrence on a Deadline: India, Pakistan, and the New Escalation Paradigm
May 9, 2025 6:29 AM UTC
India and Pakistan are now embroiled in their most serious military confrontation in years, with hostilities expanding across air, land, and unmanned domains. Following the May 7 cross-border strikes under Operation Sindoor, India launched a calibrated military offensive on Thursday targeting Pakist
BoE Review: Divided by Scenarios?
May 8, 2025 1:24 PM UTC
The widely expected 25 bp Bank Rate cut (to a 2-year low of 4.25%) came amid a less dovish rather than a more hawkish assessment than was envisaged beforehand. While the new Monetary Policy Report MPR) now sees inflation fall below target almost a year earlier than seen three months ago (Figure 1)
China Moderate Triple Monetary Easing
May 7, 2025 6:31 AM UTC
• China has announced a 10bps cut in the 7 day reverse repo rate to 1.4%; large than expected 50bps cut in the RRR rate and credit easing via Yuan1.1trn balance sheet quota expansion to counter the slowdown in growth. Combined with the extra equity capital for state banks this will help c
U.S. Equities: Vulnerabilities Remain
May 1, 2025 10:25 AM UTC
We are concerned that valuations remain high and inconsistent with nominal and real government bond yields going into a growth slowdown as tariffs hit the U.S. economy. Our baseline is for the S&P500 to fall to 5000-5200 mid-year before recovering to 5500 by end 2025. The 10yr budget bill is lik