BlueBay: Plenty of macro volatility

BlueBay: Plenty of macro volatility

July 21, 2023

Outlook
Positief positive thumbs-up (Leopold Boettcher, Pixabay)

In the next few weeks it isn’t immediately obvious what will cause recent optimism to dissipate.

‘It will be a busy week with all four major DM central banks having their policy meetings’, says Mark Dowding, BlueBay CIO at RBC BlueBay Asset Management. ‘The ECB and Fed meetings appear the most predictable of these, with both the BoE and BoJ outcomes subject to a degree of uncertainty. We see US and euro rates as more tactical trade opportunities, subject to the levels we are trading at within the range. Elsewhere, Japan and UK seem to offer a more compelling structural narrative. We continue to see plenty of macro volatility ahead of us, given elevated levels of uncertainty over future outcomes.

In this context, it is hard to remember the last time one would meet with an array of analysts ranging from those who might expect US rates to rise by 300bp in the next two years, to those who would discount a similar amount of rate cuts to occur.’

Cause for optimism?

‘Although in the UK it feels like southern Europe has stolen all of the sunshine and warm weather, generally speaking it still feels like a week when good news has prevailed over bad. Indeed, this week it was even pleasing to see rapprochement between the ever-genial US Treasury Secretary Yellen and Chinese Vice Premier He.’

‘We are somewhat sceptical that inflation will return to central bank targets in the absence of a more material slowdown. This simply means that in the absence of weaker data, rates can be expected to go higher for longer, and ultimately this is something which is likely to take its toll.

That said, in the near term, we don’t seem to have reached that inflexion point just yet and in the next few weeks it isn’t immediately obvious what will cause recent optimism to dissipate.’

Related posts