Preparing for Diverging Economic Paths

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Text on screen: Marc P. Seidner, CIO Non-traditional Strategies

Marc Seidner: I think we all know the tightening cycles of 2022 and 2023 were

FULL PAGE GRAPHIC TITLE: Global monetary policy diverging

The chart shows two lines representing policy rates of two developed market countries and is labeled Synchronized Hiking Cycle – it shows a rising trend up until it reaches a peak at the center of the chart, where they start to plateau. Both lines start to decline, but they are no longer synchronized as one line declines faster; this is labeled Diverging Cutting Cycle.

largely synchronized events across the globe and amongst all major central banks as a result of the post pandemic dynamic, supply chain disruptions and excess demand.

I think our sense heading forward is that while markets are pricing a synchronized normalization or easing cycle, the actual results might be very different.

We think there very well is likely to be a divergent path of policy, which setting the stage and opening the aperture up a little bit for longer term bond yields, creates real opportunity.

FULL PAGE GRAPHIC TITLE: Global monetary policy diverging

Australia, Canada, and the United Kingdom appear green on a map and pop out from the rest of the world

Markets like Australia, Canada, the United Kingdom, very similar government bond yields to the United States both on a spot and a forward basis.

In fact, in some instances like Australia, substantially higher forward yields and if we do get this divergent pass through of the tightening cycle, differentiated economic outcomes, that's going to create in our minds great relative value and an opportunity to outperform passive benchmarks by actively positioning across various markets.

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