"Remember that US equities had one of its worst relative years in 2025, especially against Europe and Japan. It’s time to make up some ground." - after 15 years of a one way bet, are you really saying we only get one year of mean reversion, Peter?!?
The big picture macro drivers are most positive for the US v RoW. Fiscal + widening current account deficit. Add to that the tilt towards deficit spending on higher wealth categories against Biden's largesse
Really enjoyed your thoughts on longer-end JGBs. I dunno if you follow the BoJ speakers, but they have flip flopped on Dec hike almost inversely with the Fed Dec cut premiums picking up this week. Today's Tokyo CPI ought to reinforce some hawkishness for BoJ.
I don't follow any central bank speakers as a general rule! I do think they are close to the end here, so a December hike or not I don't think will change things meaningfully in 6 months' time.
All of this is reliant on a slowing of inflation next year though.
Makes sense tbh, a lot of noise and no real signals, does introduce bouts of vol in the JP rates space which is where my primary focus is so is at least an interesting opportunity.
I do agree that the near term rate hike is a certainty with timing subject to inflation pickup/moderation. The recent bear steepener in yield spreads should probably make a few pension funds/lifers etc reconsider allocation on 20+ end.
Do you see any potential risks for the extra fiscal spending to trigger another steepner in Q1'26?
Fiscal is a very mature macro narrative. There is nothing right now that can take it further in bonds. Europe has to play out the second half there, but elsewhere I think it's done.
The effect on equities will take longer and will be through above average returns.
"Remember that US equities had one of its worst relative years in 2025, especially against Europe and Japan. It’s time to make up some ground." - after 15 years of a one way bet, are you really saying we only get one year of mean reversion, Peter?!?
Yes! Haha
The big picture macro drivers are most positive for the US v RoW. Fiscal + widening current account deficit. Add to that the tilt towards deficit spending on higher wealth categories against Biden's largesse
EM Asia might be the only exception
Really enjoyed your thoughts on longer-end JGBs. I dunno if you follow the BoJ speakers, but they have flip flopped on Dec hike almost inversely with the Fed Dec cut premiums picking up this week. Today's Tokyo CPI ought to reinforce some hawkishness for BoJ.
I don't follow any central bank speakers as a general rule! I do think they are close to the end here, so a December hike or not I don't think will change things meaningfully in 6 months' time.
All of this is reliant on a slowing of inflation next year though.
Makes sense tbh, a lot of noise and no real signals, does introduce bouts of vol in the JP rates space which is where my primary focus is so is at least an interesting opportunity.
I do agree that the near term rate hike is a certainty with timing subject to inflation pickup/moderation. The recent bear steepener in yield spreads should probably make a few pension funds/lifers etc reconsider allocation on 20+ end.
Do you see any potential risks for the extra fiscal spending to trigger another steepner in Q1'26?
Fiscal is a very mature macro narrative. There is nothing right now that can take it further in bonds. Europe has to play out the second half there, but elsewhere I think it's done.
The effect on equities will take longer and will be through above average returns.