Global Fixed Income Views 3Q19Contributor Bob Michele
Themes and implications from the Global Fixed Income, Currency & Commodities Investment Quarterly meeting
- Our fears about a trade war have become reality; Sub Trend Growth is now our base-case scenario, with a 45% probability.
- We have raised the probability of Recession to 20% from 10%, as the fatal erosion of consumer and corporate confidence has begun, and give Crisis a 10% probability, recognizing how rapidly things might unravel in an all-out trade war.
- We expect the Federal Reserve (Fed) to begin cutting rates in July and China’s central bank to respond with its own tools to try to stabilize the global economy. Our base case is a 10-year U.S. Treasury yield of 1.75%–2.25%.
- Among our top picks: high quality duration such as three- to five-year corporates, long government bonds, AAA asset-backed securities and certain mortgage-backed securities, and research-driven yield (including short securitized credit and emerging market debt).
Scenario probabilities (%)
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