We are anticipating a stable macro environment in the near future, with some uncertainties stemming from U.S. elections and monetary policy. We continue to look for spreads to mostly remain range bound, with a low chance of further tightening. With a low risk of recession, a carry strategy is preferred in the next quarter or two, meaning we prefer investments with attractive yields, while remaining cautious about potential weakness.
Key Takeaways
- We are anticipating growth to slow and policy rates to decline globally.
- We continue to expect credit spreads to mostly remain range bound, with a low chance of further tightening.
- Carry strategy is preferred in the short run, while remaining cautious about potential weakness.
- Consumers and housing fundamentals mostly remain resilient, while prepayment risk should be monitored.
- Fed rate cuts are anticipated to support equity valuations, given strong fundamentals of companies.
- The USD remains sensitive to monetary policy and U.S. elections in the near future.
We Anticipate Slower Economic Growth Globally
Global—Global manufacturing activities were cooling in the past three months, driven by declines in production, exports and demand, according to S&P Global. As the European Central Bank (ECB) cut rates again in September, we are looking for more major central banks to join the rate cut cycle, lowering GDP-weighted policy rates further in the short term.
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