US Treasuries and equities staged a strong comeback last week after US President Donald Trump appeared to strike a conciliatory tone on Fed Chair Jerome Powell and on the tariff deadlock with China. However, several US manufacturing activity indicators point to renewed contraction in regional manufacturing activities, and polls conducted by ABC News and The Washington Post revealed that 64% of respondents disapprove of the Trump tariffs, and 7 in 10 believe that the tariffs will lead to higher inflation.

Against this backdrop, Julius Baer now expects two 50 bps rate cuts for the US, and have raised its recession probability to 50% from 35% for the next 12 months.

This episode is presented by Magdalene Teo, Head of Fixed Income Research Asia at Julius Baer.