Lower rates combined with credit spread carry will be significant performance drivers
Risky asset will take advantage of rate cuts’ expectations
US Dollar will weaken and Japanese Yen recover
Risks to our scenario
Hard landing deflation explicitly accommodative stance
– With earnings prospects declining, equities will be hit the hardest
– Government bonds will play their safe haven role
– Credit spread, especially on high beta, will widen but carry would compensate Focus on short maturities
Firm growth inflation explicitly restrictive stance
– Earnings growth would benefit from persistently high inflation, with global equities posting positive returns, along with quality High Yield thanks to carry (Focus on short maturities)
– Government bonds will struggle to outperform cash and money market yields
Gaëlle Boucher
Chief Investment Officer
Gaëlle Boucher
Chief Investment Officer