Schroders: The U.S. economy is highly likely to achieve a "soft landing."

According to the Zhitong Finance APP, Julian Houdain, Head of Global Unconstrained Fixed Income at Schroders, stated that the U.S. economy remains the cornerstone of the global financial market. Overall, the performance of the U.S. economy aligns with Schroders' expectations. Although official economic data for April and May showed a slowdown, it was not catastrophic, and market sentiment indicators have improved. The U.S. job market remains stable, and inflation data has not yet fully reflected the impact of tariffs driving up prices, which is still being comprehensively controlled. Based on economic data from the past month, there is no need to readjust the probability assessments for various forecast scenarios. It is still believed that a "soft landing" for the U.S. economy is the most likely scenario (65%), meaning a moderate slowdown without entering a recession. The next scenario is a "no landing" situation (20%), where the Federal Reserve is unwilling or unable to cut interest rates within 2025, with this scenario having a slightly higher probability than the risk of a "hard landing." Although the uncertainty brought by U.S. government policies is slowing growth, Schroders still believes that the economy will continue to expand at a steady but not overheating pace—neither too cold nor too hot, just right. This is largely due to consumer spending not showing significant signs of slowing down, primarily because real income growth (income adjusted for inflation) remains strong. This growth is mainly driven by the expansion of U.S. government fiscal support. While this puts pressure on long-term debt sustainability, it can support consumption and economic growth in the short term. As in the past, a significant deterioration in the U.S. job market will be a key factor in reassessing the economic outlook. Close attention will continue to be paid to labor market data, especially the recent sustained increase in initial jobless claims. Julian Houdain mentioned that in the Eurozone, the European Central Bank has first clearly acknowledged that the interest rate cut cycle is nearing its end. Given the continuous improvement in economic growth within the Eurozone, coupled with increasingly stimulative fiscal policies (especially government spending), the rationale for further interest rate cuts has become quite limited. Meanwhile, U.K. economic data more clearly reflects a slowdown in its job market and a cooling of potential inflationary pressures, such as wage growth. The market currently expects the U.K.'s eventual benchmark interest rate (the rate level at the end of this cycle) to remain relatively high, presenting investment opportunities as the interest rate differential between the U.K. and other major central banks is expected to narrow and become more aligned. Schroders maintains a neutral stance on the overall duration of bonds (interest rate risk) but leans towards deploying a steepening yield curve trading strategy, expecting shorter-term bonds (such as 5-year bonds) to outperform longer-term bonds (such as 30-year bonds). They also see opportunities in cross-market fixed income allocations, such as relative to Canadian and German government bonds, favoring long positions in U.K. government bonds (Gilts). In terms of corporate credit, following a previously strong positive performance, the rating for the U.S. CDX high-yield index (credit default swap index) has been downgraded due to a significant reduction in its valuation advantage. A negative outlook is maintained for overall investment-grade bonds, primarily due to high valuations, but a relatively positive view is held for short-duration bonds within this category. Schroders believes that U.S. government agency mortgage-backed securities remain the preferred choice in fixed income asset allocation, as they offer higher yields and lower volatility compared to U.S. investment-grade corporate bonds