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United States
Today’s Daily Shot looks at historical Fed tightening cycles since the mid-1960s, divided into two groups: those followed by soft landings and those followed by recessions. Equity performance, after subtracting cash returns, is subdued on average in the early stages of tightening. However, returns eventually diverge sharply, with recessionary outcomes producing substantially weaker returns than soft landings.
Euro Area
The ECB’s 50 basis points of tightening this year has lifted the policy rate to the upper end of neutral estimates, suggesting that further hikes would push monetary policy into restrictive territory, according to BCA Research.
Europe
The Czech Republic’s external debt has been rising.
Japan
Despite rising yields, Japan’s net interest payments as a share of GDP are projected to remain among the lowest in the OECD in 2027.
Asia-Pacific
South Korea’s forward P/E discount to emerging markets has widened to its largest since 2001.
Emerging Markets
Foreign investors are piling into Chile’s peso-denominated government debt, as President Kast’s spending restraint and a 30-measure package to deepen the bond market bolster the case for its bonds.
Equities
The ratio of the tech sector to consumer staples is approaching its all-time high.
Rates
The growing reliance on price-sensitive Treasury buyers as foreign central banks reduce their exposure has pushed the term premium higher.
