Markets

Equities

The three-child policy: too little, too late

State media announced today that China’s family planning policy will be relaxed to allow all families to have three children, up from the current limit of two. This comes shortly after China’s once-a-decade census showed that its population is aging even faster than previously expected. The policy shift will do little to alter the downward trend in births, however. It is largely economic and social trends, rather than family planning policy, that are behind the decline in China’s fertility rate in recent decades, much of which predates the one-child policy. With small family sizes now well ingrained into the fabric of Chinese society, there is little that policymakers can do to turn back the clock. The relaxation and eventual abolishment of the one-child policy around the middle of the last decade only nudged up the fertility rate marginally, with the impact on aggregate births quickly overwhelmed by a sharp decline in the number of women of childbearing age. Raising the cap from two children to three will move the needle even less.

31 May 2021

We expect a brighter future for Japan’s stock market

Although Japan’s stock market has substantially underperformed its counterparts in the US, UK and euro-zone during the past few months, we don’t expect it to remain a laggard.

28 May 2021

Lira touches new low, CEE bond yield divergence

It's been a rocky week for the Turkish lira amid more changes at the central bank and political upheaval regarding a possible link between politicians and organised crime. This, coming alongside high inflation, has reduced the chances of an interest rate cut at the next meeting in June. Meanwhile, local currency bond yields have diverged in Central Europe recently, but we don't think this will continue and see scope for further rises in yields over the coming years, particularly in Czechia.

28 May 2021
Latest Publications

We think EM equities will rise, not shine

We forecast that emerging market (EM) equities will make further gains between now and end-2022 as the global economy recovers further. However, they have lost a bit of ground to developed market (DM) equities recently and we doubt they will perform much better than them in the coming year and a half.

Earnings expectations and the outlook for the S&P 500

We expect the S&P 500 to make only small gains over the next few years. But we think some sectors – such as financials – will continue to do better than the index as a whole.

The stock market rotation may have further to run

Even if, as we suspect, the outperformance of the energy and materials sectors soon comes to an end, we expect the broader rotation in equity markets to continue over the next few years.

The next phase of the stock market rotation

Although we think that the recent outperformance of the energy and materials sectors will soon come to an end, we still expect the financials sector to continue to fare better over the next few years than sectors, such as information technology (IT), which outperformed during the early stages of the pandemic.

We doubt inflation will send the equity rally into reverse

While inflation fears have taken some steam out of the US stock market rally recently, we still think that equities in the US, and elsewhere, will make further gains over the next couple of years.

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