Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The report indicates a positive outlook for risk assets due to recent developments in trade negotiations, suggesting a potential disinflationary impact [2] - The US effective tariff rate is currently at approximately 13%, the highest in 100 years, which may dampen US growth but could also avoid a recession [9] - The report highlights the importance of upcoming fiscal policies and their potential impact on market dynamics, particularly regarding the new tax and spending bill [30][31] Summary by Sections Trade War Developments - The trade war is ongoing, but there are indications that the US may lower tariffs if they become economically burdensome [8] - Current tariffs are seen as a medium-term drag on US growth, with potential deflationary effects on services [9] - The report emphasizes the significance of non-China trade deals in shaping future tariff rates and market conditions [12] Fiscal Policy Outlook - The new fiscal bill is expected to increase deficits, with projections suggesting a potential rise to 7% of GDP [30] - Key components of the bill include increased business tax benefits and changes to child tax credits, which may influence market reactions [31] - The correlation between equities and rates is expected to drive USD performance based on fiscal outcomes [31] Currency and FX Strategy - The report advocates for a focus on high-yield currencies, particularly in Latin America, while maintaining a cautious stance on low-yielders [40] - There is a noted trend of outflows from low-yield currencies, with a preference for high-yield investments [38] - The report suggests that the current environment may favor FX carry strategies, particularly from the long side [36]