Morgan Stanley IM: Bucking the 2023 Consensus Expectations. But When?
Jim Caron, Senior Advisor for the Fixed Income Team, shares his macro thematic views on key market drivers.06.12.2022 | 08:00 Uhr
- Consensus expectations are that bonds will outperform equities in 2023.
- But, falling longer-term bond yields are inconsistent with the market’s positive risk sentiment.
- This is a paradox, as falling U.S. Treasury yields “sound the alarm” as a flight to safety, but tighter credit spreads i.e., lower default risks and buoyant equity prices reflect “no need for alarm!”
- This dilemma can play out as noise in the near term, but in the intermediate and longer term one asset ultimately wins and the other loses. But which ones?
- In other words, we expect long standing relationships, aka correlations, to reassert themselves eventually. But when exactly? We must keep a close eye on that.