Global | Holding on to our core convictions
Despite a flattening of the yield curve and some position squaring of the socalled reflation trade, we believe our key asset allocation themes are still broadly intact after the Fed’s hawkish tilt last week.
In particular, we see renewed curve steepening from here, but focused mainly on the longer end of the curve, and moderate US Dollar weakness
Developments, however, point to a less aggressive view on the end point for the US 10 year Treasury yield, amid a surge of buying from the foreign official sector, as well as the gravitational pull from other core government bond yields.
This should be enough to maintain the reflation trade within equities. Although positioning towards short duration sectors appears stretched and therefore vulnerable to a further near-term unwind, fundamentals remain supportive of medium-term outperformance.
BoK’s monetary policy to tighten even as hiking cycle ends
Even without rate hikes, central banks' monetary policies can effectively tighten if the nominal neutral rate falls below the policy rate. We expect this will be the case for the Bank of Korea this year, as the gap between the policy rate and the nominal neutral rate widens.Find Out More
China: Emerging green shoots in Spring, but not out of the woods
We now incorporate a faster recovery from the post-Covid exit wave and raise our 2023 full-year GDP growth forecast to 4.5% (from 4.2% previously).Find Out More