Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Chief Macro Strategist
Summary: Polls and betting odds are shifting back slightly in Trump’s favour. This week, we focus on what the US bond market is telling us about the US economy, as inflation and the economy are top issues for voters.
Polls have tightened a bit again, and thus back in Trump’s favour as we can see from the shift in the polling and betting odds. Stock markets saw a continued recovery in sentiment after the brief wipeout in early August. Indeed, ahead of this week’s Labor Day holiday on Monday in the US, the US S&P 500 Index posted a record high weekly closing level. Financials, industrials and materials posted the strongest week last week, while info-tech was weighed down a bit by Nvidia’s somewhat disappointing outlook, at least relative to stratospheric expectations.
The earnings calendar is quiet this week outside of the chip and software giant Broadcom, which reports on Thursday. There is a strong AI angle to that company’s potential outlook, so it bears watching for the general status of the AI theme.
With polls in closer balance, it is impossible to associate moves in specific assets with the anticipated election outcome, but the underlying direction of the economy is critical to track as we head toward November 5, as we discuss in the Chart of the Week below. A weak economy is historically associated with voters rejecting the party in power.
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