Schroders Investment: Central Bank Policies and Economic Resilience Tend Towards a "Soft Landing"

According to the Zhitong Finance APP, Schroders Investment pointed out that the policies of central banks and governments around the world are gradually alleviating concerns about a global economic recession. At the same time, the risk of an economic "hard landing" has become more balanced. Over the past month, central banks and governments have successively released a series of data and policy statements, which collectively indicate that the possibility of a global "hard landing" has significantly diminished.

Although the details of the stimulus measures have not yet been fully implemented, Schroders believes that the intention to stabilize the economy is clear, which not only significantly reduces the risk of a global "hard landing" but also provides some space for a "no landing" scenario, provided that commodity prices can receive strong support. As the Federal Reserve gradually eases its fiscal policy while maintaining robust economic growth, Schroders believes there is ample reason to raise expectations for a "soft landing" and "no landing," with "soft landing" remaining the most confident baseline scenario.

Considering the above, the proactive policies of the Federal Reserve and the relatively stable labor market support Schroders' appropriate reduction in expectations for the occurrence of an economic "hard landing."

Additionally, it should be noted that the latest inflation data from the United States shows that the process of inflation retreat has stalled in the short term. Core prices rose by 0.3% month-on-month, enough to push the annualized inflation rate over three months from 2.1% to 3.1%. Looking ahead, Schroders still believes that the trend of inflation retreat will continue, but this data serves as a reminder to the market that the process of inflation retreat will not be smooth and will still face fluctuations and challenges.

If China implements more economic stimulus measures according to the latest announcement, Schroders believes that the global economy will benefit, especially as this second-largest economy in the world begins to stabilize.

They maintain a moderately positive view on the duration of global bonds. Despite the macro environment becoming relatively unfavorable, the investment market has digested the Federal Reserve's more moderate interest rate hike expectations, leading to a significant improvement in valuations over the past month.

From an asset allocation perspective, the most favored market in September—Mortgage-Backed Securities—remains in the lead. They also have a positive outlook on quasi-sovereign bonds, which have received a slight upgrade in their ratings based on valuation considerations.

In terms of corporate credit, they still prefer European investment-grade corporate bonds over U.S. investment-grade corporate bonds, and their outlook on the European economy has improved over the past month. In the high-yield bond sector, they similarly prefer the European market