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Market Updates

May Monthly Investment Strategy - Joseki in international trade

KEY POINTS

Markets buoyed by further tariff easing, but tariff level has increased sharply and trade deals are unlikely to restore status quo ante. US fiscal bill may cause further market jitters as Moodys sovereign downgrade suggests.
Tariffs have caused GDP volatility with first US contraction in three years in Q1. Underlying growth strong in Q1, but this to fade and we forecast mild US recession.
Elsewhere tariffs have added to upside in GDP, although again likely temporary. We expect deceleration in global activity in H2, with mild recession in Eurozone.
Countries look set to offset weakening with domestic policy. ECB and BoE likely to ease more than markets price, BoC to continue easing. PBoC to add liquidity boosts from now and BoJ to hike once more this year.
Fiscal policy also used. Underway in Eurozone. Though China now to see less urgency. Several EM continue to ease fiscal policy, with or without the required space.

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