The received wisdom is that Fed tightening is bad news for many assets. But in the last three cycles, this was not always the case. Next time around, our view is that the US stock market will shrug off more restrictive monetary policy, while equities elsewhere in the world will generally fare even better. However, we think a big loser will be Treasuries – we don’t expect another bond market “conundrum”. We doubt Gilts, Bunds and even JGBs will be completely immune. But we do expect them to have a less rough ride, since monetary policy is either likely to be tightened less rapidly (the UK), or even loosened further first (the euro-zone and Japan).
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