The US retail sales data remains robust. Those recent weak Non-farm payroll prints (which were well below expectations) are not about inadequate demand, but rather more clearly about inadequate supply, in this instance of labour mostly, but also the supply of goods themselves.
As such, we remain reasonably convicted that the strong growth story, encountering supply side constraints, leads us to a taper, leads us to moderately higher rates, and ongoing downwards pressure on structural growth stocks (long duration stocks and sectors), and provides support to our UW to fixed income.
Yields are not low, as a harbinger or signal of future, weaker, expected growth.
Should we get toward a 10 year nominal treasury yield of ~2.5%, we’d happily reallocate back to SAA weights.
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