Citi Research Macro Think Tank

Investment Rating - The report assigns a "Buy" rating for the overall market outlook, indicating a positive expectation for investment returns in the near term [73]. Core Insights - Global PMIs show signs of softening, with the manufacturing PMI slightly below 50, indicating a potential contraction, while the services PMI remains above 50, signaling solid activity [10]. - A global easing cycle is underway as central banks, including the Bank of England and the Bank of Canada, have started to cut rates, with expectations for further cuts from the Fed and ECB [15]. - The US economy may already be in a recession, as indicated by rising unemployment rates and a cyclical slowing in the labor market [18]. - Geopolitical tensions in the Middle East have escalated, increasing the risk of further conflict, which could impact global markets [21]. - The Bank of Japan is expected to delay further rate hikes until at least May 2025 due to recent economic volatility [25]. - The JPY carry trade is under pressure, with expectations of a significant correction in USDJPY, potentially falling below 140 in 2025 [37]. Summary by Sections Global Economics - Global PMIs indicate a slight pullback, with manufacturing PMIs in developed markets below 50, while services PMIs remain robust [10]. - Central banks are beginning a global easing cycle, with inflation risks appearing more contained than in previous quarters [15]. US Economics - The unemployment rate rose to 4.25% in July, suggesting the US economy may be entering a recession [18]. - The Federal Reserve is expected to cut rates by 125 basis points by mid-2025, responding to subdued inflation and a weakening labor market [19]. European Economics - Recent events in the Middle East have heightened the risk of regional conflict, which could have broader implications for global markets [21]. Japan Economics & Rates - The Bank of Japan is likely to maintain its current monetary policy for now, with expectations for a rate hike delayed until May 2025 [25]. G10 FX - The report anticipates a significant correction in JPY carry trades, with USDJPY expected to decline substantially over the next few years [37]. Commodities - Oil prices may rebound from recent lows due to geopolitical tensions and potential weather-related disruptions, with Brent prices projected to bounce back to the low-to-mid $80s [44]. US Equity Strategy - The report discusses potential tax policy changes depending on the outcome of upcoming elections, which could impact corporate earnings and market positioning [46]. European / Global Equity Strategy - The report notes a recent correction in global equities, with positioning still vulnerable to negative news, suggesting a cautious approach to buying into weakness [48]. Global Macro Strategy - Concerns about a hard landing for the economy are prevalent, with a neutral equity position recommended until clearer signals emerge [52].