Stocks vs Bonds: Awaiting Tactical Signals for High Conviction Bearish Outlook
This week I covered the following topics:
1. Global Policy Pulse: After delivering a substantial shift in policy stance (from headwind to tailwind for global growth + equities) central banks globally are beginning to wind-down the rate cut rush.
2. Thinking Fed Funds: Despite growing demands, there is currently no obvious reason for the Fed to reduce interest rates materially, unless you change the mandate/interpretation thereof or facts.
3. Stocks vs Bonds: It’s a watching brief on stocks vs bonds given valuation extremes, but awaiting tactical elements (macro, technicals) to be outright high conviction bearish.
4. Credit Spreads: Credit spreads are back to rock-bottom, and along with stocks are basically at expensive levels; seasonal volatility updrafts suggest keeping a closer eye on credit.
5. Treasuries: US treasuries look cheap and likely perform well as a diversifier in a downturn, but multiple sources of higher-for-longer risk continue to linger.(positioning, ESG backlash run its course).
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