Pilar Gomez-Bravo 5.0 6 ideas

Fixed income markets are pricing in higher risk premiums due to fiscal concerns, creating opportunities for active investors to capitalize on dislocations, particularly in U.S. Treasuries and U.K. Gilts, based on expectations of fiscal policy.

If the Strait of Hormuz reopens, there would be an initial overreaction correction in bond curves, leading to a rally in short-term yields, especially in Europe and the U.K., as inflationary expectations spike and then correct.

Underweight dollar was a very big positioning... that's one of the first things that we did when the war broke out, is to cover the underweight. The combination of a global energy shock, delayed Federal Reserve rate cuts, and geopolitical instability creates a perfect storm for the US Dollar. As other regions suffer more acutely from the energy crisis, capital will flow to the safety and higher relative yield of the USD. LONG because the dollar acts as the ultimate safe-haven asset while simultaneously benefiting from a higher-for-longer US interest rate environment. Coordinated central bank interventions to prop up local currencies could temporarily halt the dollar's momentum.

We're waiting to sort of see kind of the US price out any cuts at all this year in order to potentially add duration in the US again. The market is currently in the process of capitulating on its previous expectations for 2026 Fed rate cuts due to the oil-driven inflation shock. Once these cuts are fully priced out, long-term Treasuries will reach maximum pessimism, offering an optimal entry point for yield and eventual cyclical easing. WATCH for the final flush in bond prices as the market accepts zero rate cuts this year, which will set up a contrarian buying opportunity for long-duration bonds. If the energy shock triggers a severe secondary inflation spiral, the Fed may be forced to actually hike rates, causing further severe drawdowns in long-duration bonds.