Quick LDW Update

Happy Friday,

And Happy Labor Day weekend to those laboring in the vineyards of volatility!

While non US negative yields pull US rates ever lower, one wonders if rising recession fears via inverted Yield Curve are offset by the lower likelihood of an actual recession via reduced credit crunch risk?

China is playing a very steady hand in terms of trade conflict & stimulus. SL Jen's idea of an “L shaped” China recovery makes sense & suggests China will neither rescue nor sink the global economy.

This has huge implications for Europe & Germany which are being repriced as free riders on global demand & hence most at risk. Europe needs fiscal stimulus and needs it now.

How much of this is priced in? Germany trades at a record discount to Europe & at close to 20 yr record vs the US on a P/B basis.

Given how beared up folks are it would be just like Mr. Market to pop in September.

Talk about the end of globalization: G7 reveals complete lack of political will to use fiscal stimulus at a time of generational low rates to meet the challenge & opportunity of global climate change.

Our Tri Polar World (TPW) framework continues to resonate as each region is forced to self stimulate: Europe has the most room, followed by Asia & Americas least. In turn, our Lower for Longer Global Growth Path may be more elongated & shallow than we have thought.

Rest up, September is sure to be interesting!

Jay and Jamie