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The rites of summer

A 10-year US Treasury yield trade just a tad above 0.5%, gold north of USD 2,000/oz and US stocks at or above record highs. Mr Bond says: ‘no growth’, Mr Gold says: ‘inflation’, while stocks holler: ‘where’s the problem?’ How to make sense of this?

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In a nutshell, it looks like markets are getting prepared for stagflation overall. At the same time, listed US companies benefit both from a cheaper dollar and a shift in business models worldwide. Of course, global asset prices are trotting in the tracks of the US behemoths.

The uncertainty about the growth trajectory for the US may not only be due to the failed consensus on the fiscal support extension
But the US Congress did choose to go into recess without extending much-needed benefits for consumers and corporates to weather the crisis. The president’s executive orders will hardly make up for that. As a neutral observer, you are torn on whether or not you want to see the honourable members of Congress save the day in the 25th hour by coming back from recess. For while it is good for everyone if they do, that will just show that it was all about creating political capital with the electorate by producing stress only to provide relief. The jury is out for now. Across the pond, China is doing better by the day. We see positive data coming in that is broadening in terms of sectoral and geographical reach.

No major change in investment is warranted.

Christian Gattiker, Head of Research

In investment terms, we see that the crisis handling in the US is more uncertain than ever and this means further jitters for the US dollar in particular
But then again, we do not see any signs of a big US dollar debasement around the corner (or any fiat currency for now). It is just that the lever to turn printed money into growth has broken down over the summer. So, from that standpoint, no major change in investment is warranted: simply stay clear of US dollar cash and keep holding (or buying) the winners.