US
US macro data strongly exceeded expectations, today.
Consumer confidence (see bottom right, bouncing sharply on the Conference Board measure of consumer confidence)…
…new home sales (bottom left, 763K, 675K expected) peaking up noticeably against the prior decline…
…and durable goods capex, all well above consensus.
Across the multi-asset investment strategies, we are equal-weight (neutral) international equities. Our underweight equities at the portfolio level stems from our underweight to Australian shares, predicated largely on our fears of overleveraged Australian households cutting back on consumption as variable rate mortgages rise.
The US doesn’t have this problem, because of the structure of their mortgage market, where 15 and 30-year fixed-rate mortgages are common. If you bought a home any time over the prior 3 years, you’ll find the rate you earn on your cash at bank exceeds the cost of your mortgage. That is a pretty stunning sentence to write, but it explains the resilience of the economy.
US equities are somewhat expensive, in our view, relative to other parts of the world, and so we are around 8-9% UW the US, on relative valuation grounds, but that belies the fact that ~55% of our exposure is to the US, given it is such an enormous weight within global benchmarks.
However, this very strong macro data does push back any near-term forecast of a US recession, yield curve inversion or not.
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