How healthy are global markets? - TD Securities
"The three biggest fundamental uncertainties to nail down market opportunities right now are how bad is global export growth likely to be, how much will that feed back into slower global growth, and how much further will the recent tightening in financial conditions damage growth?" note TD Securities analysts.
"We believe such volatility will continue to be driven by the very nature of the exit from QE and Fed funds close to neutral. So far, the link between financial stress and the typical tightening in credit conditions has been lower than usual and the release of the Senior Loan Officer Survey in February may confirm the same here."
"Beyond this, we find evidence that a deceleration in global demand was underway, but exacerbated by tariff-related de-stocking in Asian supply chains around year end."
"Meanwhile, price action suggests that much of the recent underperformance in risk assets relative to Treasuries was due to the market perception of a Fed policy mistake. With the shift in tone from recent Fedspeak, we think that the narrative will shift from policy mistake to fundamentals, meaning growth momentum will become the key driver."
"Investment grade credit should continue to remain the high beta asset class and we are tactically short 5y US duration."