Third time lucky?
- For the third time since summer, hopes of an imminent Fed pivot have triggered market relief.
- That still looks premature as big inflation overshoots keep steering central banks’ hands for now. Yet markets may take some comfort from a slower pace of Fed and ECB tightening after fresh Oct/Nov jumbo hikes. Warm weather and falling natural gas prices are also helping sentiment just now.
- Amid strong headwinds from a developing euro area recession and cracks in the financial plumbing, we stick to a prudent allocation stance.
- We keep a underweight in risky assets (Equities, HY), while preferring IG Credit and Cash. A reversal of stretched USD strength is not (yet) due.