Skip to content

Cross-Asset Weekly

Moving to a more challenging macro environment

Basel, 10.08.2018
We remain constructive on the US economy over the short-term. But there is a risk that a tight labour market, combined with a pro-cyclical fiscal policy and escalating trade tensions lead to higher inflation, forcing the Fed to tighten policy faster than we and markets currently anticipate.
The Pound has weakened further this week as increasing concerns over a “crash-out” Brexit weigh on investor sentiment. This week’s selloff continued the recent trend, leaving GBP now reasonably cheap from a valuation perspective. Short-term investors have contributed to the selling and positioning has become aggressively bearish leaving the market exposed to a short squeeze. While, we expect a “market-friendly” deal long-term (and stronger GBP), we would rather remain on the sideline given the likelihood that the situation worsens before it improves.
Very robust US company earnings for 2Q 2018 confirm at the corporate level the solid underpinnings of the US economy. These figures hint at further medium-term upside for US equities and warrant an overweight at the regional level. We would use pullbacks in coming weeks to add to US equities.
Chinese policymakers are becoming more proactive by the week as they attempt to ward-off the threat of a trade war to an already-slowing domestic economy. It might not be long before more meaningful fiscal measures are unveiled, and if they are orientated towards infrastructure these could give a lift to the prices of industrial metals and assets in those Emerging Markets (EMs) that produce them.

This week’s highlights

US Macro
The Fed might need to raise rates faster than expected

Foreign Exchange
British Pound sells off amid increased Brexit concerns

Global Equity
Reporting season hints US equities have more upside

Emerging Markets
Fiscal stimulus is the next logical step for China

Economic Calendar
Week of 13/08 – 17/08/2018

Market Performance
Global Markets in Local Currencies

Please read the complete publications in the download area.

Further information
Dr. Karsten Junius, CFA  |  Chief Economist

T: +41 (0)58 317 32 79 | E-mail: