On this week’s agenda, the US Federal Reserve will also most likely announce its long-awaited 50-basis-points rate hike, while adding some colour on what can be expected from policymakers over the summer. Finally, the US labour market report will be closely monitored for any supply response by the workforce and signs of wage increases fuelling further inflation pressure.

All in all, we see that bond markets have caught up with economic reality. We have thus tweaked our bond yield forecasts and believe that yields should become somewhat steadier after shooting up since the start of the year. This, in turn, should open up some opportunities in riskier credit, where some low-investment-grade USD bonds have surpassed the 4% mark. On the currency front, the first-mover advantage in developed markets stays with the USD, until interest-rate expectations catch up elsewhere during the summer.

After all these moves in the economy and markets, investor sentiment readings have reached bearish extremes (see our number of the week). On some gauges, sentiment has hit all-time lows lately. You may argue that bearish investors alone are no guarantee of an immediate market bounce. You may be right, of course, since investors could be bearish for good reasons, i.e. because the situation is bound to further deteriorate. However, what really strikes us is that some of the absentees from last year’s buying spree are back. Over the weekend, investor legend Warren Buffett announced a material ramp-up in stock-market investments after a few quarters of only buying back his own company’s shares. The focus was on commodity-related names, with a particular tilt towards oil & gas stocks. Our analysts agree with buying quality names.

Number of the week