Greetings from Copenhagen.

A (vague) trade deal is secured with the UK, Bessent is meeting with Chinese trade officials this weekend and multiple other trade deals are seemingly lined, which equity markets are enjoying on the surface. Yet, every single pundit out there is calling for the rally to run out of steam sooner rather than later, citing IMF growth revisions and the fact that even sizable reductions in global tariffs will still not be enough to get the train running again. This is most definitely the most hated risk asset rally we have seen in a while, and it rhymes a bit with a combination of the scenes we saw after the awful NFP report in August 2024 and the supply shock during the pandemic. 

Simple history-comparisons suggest that we are at the “make or break” point in equities, and if the September 2024 analogy holds, we should soon start to see a pick-up in economic surprises as well – which is what equities and bond yields are frontrunning currently.

So what’s up and down in all of this, and is there any merit to the doom-talk, or should equities continue to gain from here?

Chart 1a: We Typically Move Higher from These Levels If a Recession Isn’t in Sight