2019 Q2 outlook: Receding fears
In a world where the Fed is on hold and the PBOC is easing, the fallback position is an ongoing search for yield, primarily in sovereign and credit curves as well as the S&P500. The question is what will drive the markets? We look to see three main themes to emerge next quarter:
1) Expectations of a Chinese economic recovery
2) A Fed on hold in 2019 whereas we expect 25 to 50 basis points in the second half of the year before a pause for 2020.
3) Trade negotiations between the US and China continuing into the second quarter. This could lead to sporadic periods of volatility.