Cyclical sectors still vulnerable

Cyclical equity market sectors have recouped part of their H1 underperformance of defensive sectors but monetary and cycle considerations suggest further weakness ahead.  MSCI divides the 11 GICS sectors into cyclical and defensive baskets, the former comprising materials, industrials, consumer discretionary, financials, real estate, IT and communication services, and the latter consumer staples, health care, […] Continue reading

Chinese money update: net improvement

The assessment here a month ago was that Chinese monetary policy easing was gaining traction but that additional stimulus and a further recovery in narrow money momentum were required to adopt a positive view of economic prospects. These conditions have been partially fulfilled: the PBoC has delivered additional easing and six-month narrow money growth picked up in […] Continue reading

Is the high yield rally sustainable?

The yield spread over Treasuries of the ICE BofA US corporate high yield index rose from 310 bp at end-December to a peak of 599 in early July. It has since retraced more than half of this move. Was the early July peak a major top, with a further decline in prospect? This seems unlikely, […] Continue reading

US banks signalling H2 credit crunch

The Fed’s July senior loan officer survey signals a major slowdown in US bank lending in H2 and 2023. Most commentary focuses on survey responses about credit standards and demand for commercial and industrial (C&I) loans. However, the Fed calculates aggregate indicators incorporating data for all loan categories (i.e. also including commercial real estate (CRE), consumer […] Continue reading