The rise in defence spending that looks likely in many countries over the next few years will boost demand and output, albeit by less than the headline-grabbing figures might suggest. Meanwhile, higher defence spending could give a significant boost to …
13th March 2025
Recent shifts in the polls suggest new Liberal Party leader Mark Carney and Conservative Party leader Pierre Poilievre are both in with a decent chance of winning the forthcoming general election. The next Prime Minister will face huge challenges over the …
10th March 2025
The Chancellor, Rachel Reeves, will present her fiscal update on 26 th March against the challenging backdrop of geopolitical ruptures, tariffs threats and a stagnating domestic economy. We expect Reeves to tighten fiscal policy by a further £10bn (0.3% …
Notice: This publication was revised on 07/03 to accurately reflect the deficit on the funds budget in 2024, taking into account the funds used for the local government refinancing scheme that year. The original version of the publication stated that …
5th March 2025
New Zealand’s current account deficit will remain large as domestic demand rebounds and the government is running a sizeable structural budget deficit. While the New Zealand dollar has recently been among the worst-performing G10 currencies, we expect it …
3rd March 2025
An end to the war in Ukraine would fundamentally change the economic outlook for Russia and Ukraine, but a lot would depend on the nature of any peace agreement. A deal that involves large-scale sanctions relief for Russia would be the most positive for …
27th February 2025
The sharp falls in cryptocurrency prices in recent days highlight why cryptocurrencies including Bitcoin remain unlikely to take over from established fiat currencies or usurp gold as the preferred store of value. Even if prices were to fall more sharply, …
While some Russian pipeline gas flows into the EU could resume as part of any Ukraine-Russia peace deal, at most such supplies would probably only recover to about a quarter of pre-invasion levels. From an energy price perspective, the looming ramp-up …
24th February 2025
We think that the US utilities sector will outperform the other 'defensive' sectors in the stock market in 2025 and keep pace with the S&P 500, which we expect to rise to 7,000 this year, as utilities are well-placed to benefit from surging AI power …
We expect Korea’s economy to grow by just 1.0% this year, with the political crisis and the downturn in the property sector set to weigh heavily on demand. Our forecast is well below both the consensus expectation and our estimate of trend growth. We …
19th February 2025
We expect Germany’s next government to reform the national fiscal rule to allow some tax cuts and increased public investment. But it is likely to make slow progress on structural reforms such as digitalisation and improving the environment for start-ups. …
4th February 2025
EU policymakers have stepped up their calls for progress towards Capital Markets Union and there will be steps in that direction in the coming years. But we aren’t holding our breath for major change. And even if policymakers do more than we anticipate, …
31st January 2025
The inflationary impact of tariffs for all President Trump’s various tariff threats would, if implemented in full, trigger a rebound in consumer price inflation later this year to between 3% and 4%, which would make it much harder for the Fed to resume …
28th January 2025
Having hit a record high, we expect the trade-weighted US dollar to climb further in 2025. While the short-term danger that a strong dollar poses to the world economy tends to be overblown, the bigger risk is that is worsens external imbalances which …
24th January 2025
The declaration of a National Energy Emergency underlines President Trump’s aspiration to extend the US’s dominance in global energy markets, and his willingness to use the US’s clout as leverage will reshape global energy flows during his term. That …
23rd January 2025
China’s surging exports have been gaining international attention, but concerns about overcapacity have focussed on “strategic sectors”. Far less acknowledged is the fact that China has been gaining significant global export market share across the board, …
22nd January 2025
We suspect that a Coalition government would run slightly tighter fiscal policy than Labor, which in turn may encourage the Reserve Bank of Australia to loosen monetary policy a bit more aggressively than we’re anticipating. But while we expect the …
Developments over the past year have put France’s public debt on a steeper upward path, with the debt ratio now likely to rise from 113% of GDP last year to around 126% by 2030. We see little chance of a sustained fiscal consolidation in the coming years …
21st January 2025
The Shape of the Fractured World in 2025 The share of the fracturing global economy that is accounted for by China and its geopolitical allies contracted in 2024, leaving it under a third the size of the US bloc at the start of 2025. This fall was in part …
17th January 2025
Mexico is arguably the most vulnerable economy to US trade protectionism. This in-depth analysis maps out economic and financial linkages between Mexico and its northern neighbour to provide a clearer sense of how tariffs would affect the economy and how …
15th January 2025
If Donald Trump were to impose a universal 10% tariff on US imports, we wouldn’t expect widespread reshoring of manufacturing production back to the US. And if it were accompanied by a 60% tariff on Chinese imports, the main beneficiaries would be other …
14th January 2025
In this Focus , we explain why we expect the S&P 500 to continue to thrive in 2025, after correctly predicting that it would soar in 2024 . We are sticking to our forecast that it will end this year at 7,000. One reason we expect the S&P 500 to rally this …
10th January 2025
US President-elect Donald Trump’s increasingly aggressive rhetoric against Canada suggests we should take his tariff threats seriously. We already assume that Trump includes Canada in a likely 10% universal import tariff, but we remain relatively sanguine …
9th January 2025
We now expect underlying inflation to remain above the Bank of Japan’s 2% target for most of 2025 and the Bank to hike rates to 1.25%. However, we believe that it’s too early for the Bank to declare victory in its quest to lift inflation sustainably to …
8th January 2025
Donald Trump’s second term could redraw the global geopolitical map. A sustainable “Grand Bargain” with China, warmer relations with Russia, or a breakdown in the relationship between the US and its traditional allies could each reshape supply chains and …
7th January 2025
Immigration has probably added around 0.6%-pts to GDP growth per year on average across advanced economies since the pandemic. But tighter restrictions on immigration will weigh heavily on GDP growth in the US and Canada over the next few years. And the …
16th December 2024
Despite being around multi-decade lows, we think credit spreads of US investment-grade (IG) corporate bonds could fall further still over the next year or so. Last month, the option-adjusted spread of the ICE BofA US IG Corporate Index reached its lowest …
12th December 2024
The price of natural gas in Europe was thrust into the spotlight during Europe’s energy crisis and remains a key political and industrial pressure point. In short, we expect natural gas prices in the EU to halve over the coming years as global LNG …
10th December 2024
We think that the shift in the shape of consumer spending over the past few years away from spending on goods towards spending on services is here to stay. While the recent strength in spending on housing rents may not persist, over the next couple of …
5th December 2024
The incoming Trump administration’s proposed crackdown on immigration means labour force growth is likely to slow toward zero. That would pull down potential GDP growth to less than 2% and labour shortages would contribute to increased inflationary …
4th December 2024
Although the Republicans completed a clean sweep in the recent election, we are sceptical that this opens the door to additional fiscal stimulus. We do expect the original Trump tax cuts, which are due to expire at the end of next year, to be extended. …
3rd December 2024
The fact that climate mitigation policies can manifest themselves in a range of macroeconomic outcomes will make it difficult for central bankers to know how to respond appropriately. Meanwhile, the increased push-back against low-cost Chinese green …
27th November 2024
One of the many problems that the next German government will have to contend with is the struggling car sector. Unfortunately, the sector’s challenges are only likely to intensify given the prospect of sluggish European demand, rising competition from …
India’s stock market has had such a good few years that it started to raise concerns about whether it was in a “bubble”. And as it’s come under pressure recently, some have speculated that the bubble is bursting. For our part, we think that there are …
26th November 2024
We discussed the global impact of higher tariffs in a Drop-In on Tuesday, 26th November. Click here to watch the 20-minute online briefing. In this Focus, we construct a framework to explore the channels through which an import tariff works, which we use …
25th November 2024
Our base case is that protectionist policies from the US next year will have only a small economic impact on Europe, but the fallout will vary between countries and there are risks of greater damage if the trade conflict escalates. Meanwhile, the EU will …
22nd November 2024
Romania will elect a new government over the coming weeks at a time when the economy is performing poorly, inflation is running above target, and macroeconomic stability depends on policymakers pushing through much-needed fiscal consolidation. The most …
21st November 2024
While we expect the RBNZ to cut interest rates by the most since the GFC over the coming year, housing affordability was never as stretched at the start of an easing cycle as it was at the start of the current one. Accordingly, we only expect house prices …
19th November 2024
The recent downturn in US commercial property has piqued investor interest in alternatives as they look to diversify. With an aging population, senior housing has a clear long run structural demand driver pointing to further growth in the sector. Our …
18th November 2024
Donald Trump’s second presidency is likely to result in lower US GDP growth, faster US inflation and a slightly higher path for the fed funds rate. The implications for the rest of the world are highly uncertain, not least because it is unclear how many …
6th November 2024
We think that if Vice President Harris wins the US presidential election next week, she would be more likely to stick to policy continuity, and EM risk premia would remain low. If former president Trump is elected, we would expect an initial adverse …
1st November 2024
The government’s plan to trim the population will hit potential GDP growth and, given the headwinds for residential investment, reduce the chance of GDP reaching that lower potential level. Rents on new leases are set to fall, which presents downside …
31st October 2024
This Budget is big, both in the way it defines the government’s plans and the money it raises and spends. The key point is that it loosens fiscal policy relative to previous plans and is therefore consistent with GDP growth perhaps being a bit stronger …
30th October 2024
With the Conservatives currently on track to win a clear majority at the next federal election, which is due by October 2025 but could come much earlier, there is a high chance that the carbon tax will soon be scrapped. We do not think this would alter …
28th October 2024
While the perceived probability of a Trump win has increased over recent weeks, we believe there is still ample scope for a sizeable repricing across markets once the election outcome becomes clear. We think a Republican “sweep” would probably lead to …
Our central forecast is that there won’t be a fiscally induced ‘crisis’ in the Treasury market. But there is clearly a risk of yields rising in response to higher term premia and more restrictive monetary policy than would otherwise be the case, if the US …
25th October 2024
Poor economic growth and vulnerability to structural change in the office and retail sector are set to weigh on German property returns in the coming years. But solid rental prospects in the residential sector mean it remains a compelling candidate for …
23rd October 2024
The September release of US non-farm payrolls was just the start of a run of strong employment releases in advanced economies this month, reigniting fears about pay growth and inflation. However, when putting a few quirks to one side and judging a range …
21st October 2024
The persistent strength of wage growth in Central and Eastern Europe (CEE) reflects continued tightness in labour markets and lingering effects from the 2022-23 inflation shock. While the latter should unwind, we think that wage growth will generally …
Clients can view all of our financial market forecasts here , and all of our commodity market forecasts here . This Focus assesses the outlook for US energy equities, which have come into the spotlight of late amid swings in oil prices. In short, we …
18th October 2024
