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Cooling hawks

Jul 07, 2023

Yesterday the 2-year US Treasury yield briefly shot above 5%, creating turbulence in the bond and the equity markets. 2 reasons: 1/ stronger-than- expected job data in the US and 2/ the Dallas Fed governor voicing concerns that inflation was still too hot and further tightening was needed. We are less concerned as bond yield curves are heavily inverted globally and leading indicators ( see the PMIs below ) are moving downwards. Interestingly enough it is not only the manufacturing that is slowing but also the service component. With a lot of indicators pointing towards a cooling global economy, central bankers will in our humble opinion not dare to tighten monetary policy excessively and take the risk to make policy errors with an overly hawkish stance. Our portfolios are positioned accordingly. Contact us at ECP in case you want to discuss.

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