The US Fed is the dog that wags the tail. US Treasury futures forecast two rate cuts this year, which will prolong the economic cycle and prevent the USD from further strengthening.
US GDP growth is slowing but a sudden recession is not on the cards. 10-year US treasuries fell back to 2%, supporting credit. Corporate default rates will rise on the margin.
Europe’s economy goes through a soft patch and Mario Draghi opens the ECB’s door for more unconventional measures. Italy remains the bull in a China shop.
China’s economy remains under pressure. That said, the government has ample ammunition (fiscal and monetary) and uses it to support the economy. A severe drop in GDP growth can be ruled out.
The US/China stand-off is here to stay (conflict of technological and economic supremacy) and increased tariffs are largely priced into the market. Not priced in is a total break-down in negotiations.