Over the past few weeks we have seen an “everything rally” where all asset prices rose. Despite lingering doubts about a recession in bond prices, the gains come as interest rate cuts prevent a worst-case scenario. But not everything can recover from here. The outcome depends critically on the economy as the time to select an overweight asset class gets closer and closer.
The euphoria about the expected interest rate cuts by central banks in 2024 is now widespread around the world. For the markets there is no question as to whether the cuts will take place. It's just a matter of timing. And since it is now expected that the ECB will also cut its interest rates early, the real question is who will come out of the starting zone first – and fastest.
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