Head of Macroeconomic Research
Summary: Our 'Macro Chartmania' series collects Macrobond data and focuses on a single chart chosen for its relevance.
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Market tensions are increasing this morning following Trump’s threat to use tariffs to “punish” China for the way it handled the coronavirus outbreak. Over the past two days, the blame game between Washington and Beijing has sharply intensified. China blasted the United States on coronavirus response while some U.S. officials spread rumors of Wuhan lab COVID-19 origination. As a result, the yuan offshore (CNH), which is the ultimate barometer for US-China trade war, is on high alert again. It is approaching a key technical resistance at 7.15. That level has become a line in the sand for investors all around the world and, if broken, it could signal that China is ready to let go further its currency which would have very negative implications for risk assets. A break would mean more contentious trade war on the top of the preexisting health and economic crisis and would induce a big move in the dollar and put negative pressure on equities and emerging market assets. At this time of the year, the classic rhyming investment adage argues you should sell before the summer. A further weakening in the Chinese yuan might finally be the reason for a market sell-off.
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach
