China's "Unbalanced" Economy & "Further Weakness" in U.S. Labor

Economic Overview - China's economy is currently unbalanced, with a significant trade surplus of over $1 trillion, but internal economic indicators are weak, including low consumer confidence and high precautionary savings [2][3] - Retail sales in China rose only 1.3% in December, marking the lowest growth rate outside of the COVID pandemic [3] - The Chinese government is maintaining its focus on advanced manufacturing and innovation rather than implementing social welfare reforms that could reduce savings tendencies [4] Chinese Market Insights - Despite strong exports, Chinese stocks are experiencing gains that appear disconnected from the underlying economy, primarily driven by AI innovation [5] - Earnings forecasts for Chinese companies are being cut, indicating a need for stabilization in earnings for future stock gains [5] U.S. Economic Data - The U.S. is expecting a jobs report with a projected addition of only 50,000 jobs, reflecting further weakness in the labor market [8][10] - The unemployment rate is anticipated to rise to 4.5%, which could lead to lower yields in the bond market if job growth falls short of expectations [10] Global Central Bank Actions - A series of central bank meetings are scheduled, highlighting the divergence in monetary policy between the Fed and other major central banks, with the Bank of England likely nearing the end of its easing cycle and the Bank of Japan expected to hike rates [12][15] - The Eurozone composite PMI rose to its highest level in two and a half years, indicating potential economic growth rebound in Europe next year [14] Fixed Income Market Outlook - The global fixed income market had a strong performance in 2025, particularly for international and emerging market bonds, largely due to a decline in the dollar [16][17] - There is an expectation for continued positive returns in international bonds going into 2026, driven by potential further downside on the dollar [17][18]