Manufacturing Indicators May Be Rebounding in US and China

After languishing for the past couple years, manufacturing gauges in both the US and China improved in November. Could this be the start of a rolling recovery for both countries' goods producers? We think so, though a tariff war would spoil the party quickly.

A revival in US goods production would likely boost bond yields as growth expectations increase. The 10-year Treasury yield could breach 4.5% by year-end in that scenario while the inflation-adjusted TIPS yield climbs above 2.0%, similar to where they traded before the Great Financial Crisis (chart).