October 01, 2019

The analysis presented here provides a very straight forward strategy for the trade negotiations. If things work out for the better, we should expect the markets and interest rates to rise and the dollar to depreciate. The obvious implication being to increase exposure to equities and shorten the duration of the fixed income portfolios. Within the equities, we expect the rest of the world to increase by a larger percentage than the US. Hence increased exposure to the rest of the world may be warranted, to the countries that lower the tariffs the most and those who benefit from the supply chain. We focus on the foreign exchange value of the dollar and the bond yields, i.e. flight to quality and the confirming indicators of which of the two scenarios is playing out.

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