In today’s briefing:
- Navigating the Yield Curve: What It Means for Equities, Other Assets, and Recession
- EA: Technically in Recession
- CX Daily: The March of Chinese Robots Into Domestic Factories
- US Debt Watch: Who’ll Absorb the Blow?
- RidgePoint Global: Q2- 2023 Outlook
- UK 2-10 Yield Curve
Navigating the Yield Curve: What It Means for Equities, Other Assets, and Recession
- Based on the historical lag between yield curve inversion and the beginning of a US recession, the next downturn should commence in Q4 of this year or Q1 of 2024.
- Our research reveals that all asset classes performed quite well between the start of yield curve inversion and the start of a recession.
- None of the asset classes in our sample experienced negative returns between the first inversion and the start of the US recession.
EA: Technically in Recession
- EA GDP growth extended the disappointment from the initial Q1 estimate by flipping the sign into a 0.1% q-o-q decline, while Eurostat also revised 4Q22 into a fall.
- Although technically a recession, the EA is not enduring a typical correction of excesses as employment is still booming. Surveys disagree about the Spring performance.
- Activity suffers short-term from real wage weakness, but that is better than the alternative in the UK, where bumper pay deals feed gratuitous second-round effects.
CX Daily: The March of Chinese Robots Into Domestic Factories
- Robots /In Depth: The march of Chinese robots into domestic factories
- Dam /: China expresses ‘grave concerns’ over Ukraine dam collapse
- Compensation /: Wrongfully convicted man seeks $2.9 million in state compensation
US Debt Watch: Who’ll Absorb the Blow?
- The recommended issuance presents a weighted average maturity of 9.47 years, which is almost two years further out than seen since Nov/21 and through 2022 and 2023 so far.
- All in all, we should expect the USD liquidity to shrink at a pace around $150bn a month.
- We expect that the effects from the ON RRP will lessen the blow for equities and other risk assets.
RidgePoint Global: Q2- 2023 Outlook
- Geopolitics — Russia’s war in Ukraine enters dangerous spring
- China — Unconvincing growth as tensions mount
- Climate — Green investing rises despite ESG blowback
- Digital Assets — Banking crisis didn’t kill crypto
UK 2-10 Yield Curve
- UK two-year gilt yields backed off from the Quarterly pivot S2 of 4.54% (high 4.58%).
- They have since been consolidating, but dips in yields have seen bond selling.
- A close above 4.54% would signal that the next phase of higher short-term yields has likely resumed.
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