I haven’t agreed with JPM’s Marko Kolanovic on much for a year but this is more like it.
Cross-asset Strategy: The ECB will likely remain focused on inflation and is unlikely to stop until policy rates are sufficiently far into restrictive territory. This should weigh on European equities which are trading close to cycle highs following a 20%+ rally. We recommend taking profits on European stocks, as recent supports are priced in and focus is likely to turn towards weakening earnings. China stocks rallied on strong mobility data and favorable regulatory actions, and we reiterate our OWs in China equities and EM local duration. Our economists believe that the mixed US labor market report, with a decline in earnings growth but also lower unemployment, means the hiking pace should slow but continue for longer. tight to other assets, and we expect this to continue.We believe that credit should outperform stocks in 2023 given conservative balance sheet management and likely strong inflows, but large negative equity market moves will still likely push spreads wider.
TD Securities nicely wraps the European challenge.
