While the officially reported macro data in the US still point to solid economic momentum, first cracks in underlying fundamentals can be seen beneath the surface. The Federal Reserve’s historic campaign of interest rate hikes has massively increased lending rates over the past 18 months – with far-reaching consequences for borrowers, who are increasingly struggling to service their loans on time.
In the meantime, delinquencies on consumer/credit card and auto loans have risen to their highest level since 2020 – and unfortunately, there is no sign of an imminent turnaround in view of the absolute interest rate level and the cooling of the real economy.
At Tramondo, we try to obtain a holistic picture of the state of the global economy by systematically obtaining a whole range of different macro and micro data. The corresponding interpretation of this data serves as an important input source for defining our tactical asset allocation.
For example, based on the above insight, we have decided to express a clear preference for high quality issuers (“investment grade”) within the fixed income allocation and to avoid cyclical securities with high credit risk (“high yield”).
For a more comprehensive look on our take of the markets last month please have a look at the latest market compass which you can download on this page.
IN YOUR INBOX
The Quarterly, and the Market Compass in the months betweeen. Tramondo’s take on markets, monetary policy, politics and economics. And resulting investment opportunities that successful individuals, families, and institutional investors need to be aware of today.