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On US and Chinese markets, and the recent crypto sell-off
Aurelie Barthere
Key Takeaways
5 min read
  • The macro picture is increasingly exhibiting late cycle characteristics, with growth and headline inflation slowing.
  • The end-destination, whether soft or hard landing, will depend on policy makers’ reaction function: The US Fed prefers to pause and observe the impact of policy (no further rate hike likely this year), but will probably not cut as early as what bond markets are pricing (December 2023).
  • China announcing another easing package is interesting. We expect more stimulus announcements into 2024, which will probably be supportive risk assets at some point.
  • Crypto is trading the range in our view, until US monetary policy becomes more accommodative. Our trading indicators have flagged likely weakness, and we are now waiting for signals to return to “risk-on”: BTC’s sell-offs have been shallow since November last year.

Economic pulse

The macro picture is becoming less foggy as we progress in this cycle. It is one of divergence, where manufacturing is on the verge of a recession, but where services are benefitting from households spending the remaining of the extra savings accumulated during the 2020-2021 covid fiscal bonanza.

The US Manufacturing Survey, which has a history of predicting economic cycles, is forecasting weaker growth, with the new orders sub-index down more than 3 points to 42.6 in May.

Meanwhile, the Services sector is doing ok, from EM Asia to the Americas, and is the main engine of growth and inflation, and the reason why mature market central banks are signaling high rates for longer.

Below are a few quotes from the...