In our regularly updated macroeconomic analysis, we offer an outlook for interest rates and currencies and look at which fixed income assets are favoured across a range of market environments.
In this edition:
Macro
We believe the global macro backdrop presents opportunities for fixed income investors. We favour positioning for a weaker US dollar, steeper global yield curves and selective credit exposure.
Credit
Hyperscalers are driving trillions of dollars in data center investment and increasingly turning to debt financing, which raises risks for investors. We highlight the opportunities and challenges of this trend.
Interest rate outlook
We are neutral on European rates. We expect the ECB to remain on hold in the near term, though a rate cut in late 2025 or early 2026 is possible if inflation undershoots expectations and growth risks rise. We are overweight UK rates, as core inflation and wages have undershot Bank of England expectations, supporting expectations of future rate cuts.
Currency outlook
We hold an overweight position in the euro, based on expectations of continued US dollar weakness and narrowing interest rate differentials. For the British pound, we maintain a neutral stance.
The bottom line
We speak with CIO and Head of Municipals, Mark Paris, about recent events impacting the US municipal market, including the October Fed rate cut, the New York Mayoral election and the elevated new issue calendar.
