Global PMI’s

Headlines

The flash PMI’s continue to roll in, yesterday Aus, overnight the US. Strong preliminary January numbers, for both manufacturing and services.

Detail

Getting hard to deny that there’s a bounce in the survey data. Given that ex-US magnificent 7 markets have quite reasonable PE’s, if you think the soft data comes to meet the hard data (rather than the other way around) there’s good reason to have exposure on (e.g. closer to one’s SAA, than running a big underweight).

Some of the key commentary embedded in the result was an ongoing decline in prices, favorable to the “inflation returning to target” narrative that is key to unlocking the rate cuts currently priced into markets.

If growth stays at trend, whilst inflation declines (to target) that unlocks modest rate cuts (in line with market expectations) than stocks can continue to grow at their usual ERP + RFR rate (alternatively EY + G), whilst bonds play a solid supporting role.

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