- Falling inflation has triggered a bond rally in the UK, US, and Eurozone with expectations for rate cuts in 2024 increasing.
- The US economy has held up well, but the Sahm rule looks set to be breached and recession worries could increase – this could see bonds rally further.
- Wage inflation is still too high in the UK and Europe, but we expect unemployment to increase over the winter and next year’s wage round should see lower wage awards.
- Tax cuts in the UK pose a threat as they could increase consumer spending. If it does, the Bank of England will be cautious about cutting rates too soon.
- Overall, we expect the downward trend in bond yields to continue and this would be supportive of risk assets.