Barclays_Global_Portfolio_Manager_s_Digest_Shifting_Signals

This document is intended for institutional investors and is not subject to all of theindependence and disclosure standards applicable to debt research reports prepared for retailinvestors under U.S. FINRA Rule 2242. Barclays trades the securities covered in this report for itsown account and on a discretionary basis on behalf of certain clients. Such trading interestsmay be contrary to the recommendations offered in this report.Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companiescovered in its research reports. As a result, investors should be aware that the firm may have aconflict of interest that could affect the objectivity of this report. Investors should consider thisreport as only a single factor in making their investment decision.* This individual is a member of the Product Management Group and is not a Research AnalystAll research referenced herein has been previously published. You can view the full reports,including analyst certifications and other important disclosures, by clicking the hyperlinks inthis publication or by going to our Research portal on Barclays Live.FOR ANALYST CERTIFICATION(S) PLEASE SEE PAGE 39.FOR IMPORTANT EQUITY RESEARCH DISCLOSURES, PLEASE SEE PAGE 39.FOR IMPORTANT FIXED INCOME RESEARCH DISCLOSURES, PLEASE SEE PAGE 40.Global Portfolio Manager's DigestShifting SignalsWe provide context and perspective on research acrossregions and asset classes, this week highlighting our updatedlook at the correlation between equity prices and nominalTreasury yields; the implications of potential SLR relief; andEurope's defense spending strategy.• Treasury yields & equity performance: The correlation between equity prices and nominalTreasury yields has recently been trending negative. Although we still think 5% UST 10Y is thecritical level for equities over the long term, more recent yield/equity behavior suggests aregime shift to negative equity reactivity at a lower level of nominal yields due to a move fromthe ultra-low yield/low inflation environment of the 2010s to the moderate yield/highinflation post-Covid environment. We believe this could persist until markets price in a higherneutral rate. With core CPI having moderated over the last two years, 5% UST 10Y should stillbe the headwind level for equities at the current level of inflation; however, if core CPI were toreflate, we would expect to see negative yield/equity correlation at sub-5% UST 10Y yields.Our base case is for the yield/equity correlation to move toward zero/neutral. In a"Goldilocks" scenario in which inflation continues to fall and/or term premium compresses,Treasury yields are unlikely to be a headwind for equities.• SLR relief implications: We expect Supplementary Leverage Ratio (SLR) reform to be a partof the overall financial regulatory agenda of the Trump administration. Our base case is thatthere is a reduction to the minimum requirement for the SLR applicable to US GlobalSystemically Important Banks (GSIB