To the surprise of some, the IMF downgraded its global growth forecast to 3.5% from 3.7% , partly due to the negative impact of U.S. and China tariff increases. Risks to economic growth include the threat of a widening trade war, Brexit and a steeper-than-anticipated slowdown in China.
Straight from my IMF source: “Financial conditions have already tightened since the fall. A range of triggers beyond escalating trade tensions could spark a further deterioration in risk sentiment with adverse growth implications, especially given the high levels of public and private debt.”
Taking this into account, our forecast models show a decline in profit margins of technology companies, a factor we believe that Wall Street is neglecting to acknowledge. For this reason, among others, Net Profit Margin maintains its long position in US Treasuries.