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While gold prices have edged down since “Liberation Day”, this is not unusual during a sudden equity market selloff. In fact, gold’s track record suggests that prices are likely to rise from here, especially if a worst-case scenario for the US economy and …
9th April 2025
We hosted two online Drop-In sessions on 3 rd April to discuss the fallout from President Trump’s Liberation Day tariff announcement. (See a recording here .) This Update contains answers to some of the questions that we received and links to several more …
3rd April 2025
In this Update, we answer several key questions about how the announced 25% tariffs on US imports of autos and parts might affect the global economy and the US itself. Mexico, Slovakia and Korea are most exposed with up to 1.6% of GDP at risk. But the …
27th March 2025
While US equity outperformance could reassert itself in the near term if concerns about US growth waned and enthusiasm about AI returned, we suspect that the longer-run story is brighter for equities elsewhere. US equity exceptionalism is under pressure. …
25th March 2025
The events of the past two weeks have called into question whether the US is severing ties not just with adversaries such as China but also allies, including Canada, Mexico and the European Union. This would radically alter the shape of the fractured …
4th March 2025
While our bullish year-end forecast of 7,000 for the S&P 500 assumes the index’s absolute valuation will approach its dotcom-era peak, that forecast is comparatively conservative based on relative valuation. If the equity risk premium reached its level in …
20th February 2025
Our base case is that Treasury term premia – and yields – rise only a little further. But we think disruptive US trade policy, among other things, poses a threat to that view and, relatedly, to Treasuries’ broader use as a hedge against any downturns in …
14th February 2025
We expect equities in Germany to underperform those in other major developed markets in the coming year or so because German firms are more exposed to the increase in protectionism which appears to be gathering pace. This will probably be more important …
11th February 2025
The UK stock market appears to be riding high – the FTSE 100 has hit a record high. But local-currency returns from UK equities have been flattered by a weaker pound. In common-currency terms, UK stocks have performed much less impressively, and we expect …
6th February 2025
US bank stocks in the S&P 500 have generally outperformed their peers over the past year and the key factors driving this look set to persist in 2025. So, we think they will remain around the front of the pack. The S&P 500 Banks Index enjoyed a strong …
28th January 2025
We are pessimistic about the outlook for most emerging market assets in 2025, due to the effects of Donald Trump’s agenda, slowing Chinese activity, subdued commodity prices, and domestic challenges. Trump’s first day in office proved a decent one for …
22nd January 2025
We think Trump’s trade policies will weigh on equity returns outside of the US, making 2025 a year of muted returns for emerging market (EM) equities. But we think it will still be a decent year for stocks in other developed markets (DMs). (See Charts 1 & …
The Cold War was defined by geopolitical blocs – the Soviet or Eastern bloc against the Western bloc. Geopolitics retreated with the collapse of the Soviet Union. The period from the early-1990s to the early-2010s was instead an era of globalisation: most …
7th January 2025
Investors’ enthusiasm for AI appears to have supported an increasingly broad set of equities of late, even if much of the associated rise in market capitalisation remains concentrated in a few of the largest firms. In August we noted that investors had …
10th December 2024
We now think the 10-year JGB yield will rise further, the yen will make more ground against the US dollar, and Japan’s equities will struggle to make much headway (in yen terms). Inflation in Japan looked, only a couple of months ago, to be firmly on the …
2nd December 2024
We held an online session on US import tariffs on 26th November. (See a recording here ). In this Update we answer the questions we were most asked. What are Trump’s motives for threatening tariffs and will he follow through? Trump has spoken about using …
29th November 2024
Given our expectation that the Trump administration will push forward with plans to raise tariffs across the board, we have generally revised down our forecasts for stock markets outside the US. And with China being the main target of the trade war, we …
21st November 2024
We have revised some of our key market forecasts in response to Donald Trump’s victory and the news that the Republicans are on course to regain full control of Congress. These include higher projections for the 10-year Treasury yield and the greenback. …
7th November 2024
We argued last year that the relative strength of Japan’s stock market mostly reflected the weak yen rather than a fundamental transformation of its corporate sector. Developments since then suggest that we were right and with the yen set, in our view, to …
23rd October 2024
A further decoupling of trade ties between the US and China or a sharp rise in Cross-Strait tensions, even if a full-blown conflict is avoided, are two big geopolitical events that we think present a big risk to the health of the “AI bubble” in the US …
11th October 2024
Since mid-2022, the average stock in the industrials sector has returned more than the average stock in all other sectors of the S&P 500. This raises the question of whether investors have a rose-tinted view of the economy’s future, since industrials has …
3rd October 2024
While some drivers of the US stock market’s recent underperformance are likely in our view to persist, we think that they will soon be outweighed by renewed enthusiasm about AI. And only when the associated bubble bursts do we expect US equities to lag …
Even though the PBOC is trying to prop up local government bond yields while the Fed is gearing up to cut rates, we think bonds in China will fare a bit better than those in the US. The PBOC has been flagging for some time that it is uncomfortable with …
6th September 2024
We held online Drop-In sessions earlier this week to discuss the outlook for major DM and EM economies and the risks that they face as we look forward to 2025. (See a recording here .) This Update answers some of the questions that we received, including …
5th September 2024
The ongoing reassessment of the monetary policy outlook in the US and Europe has (again) made the UK look like an outlier. We doubt that will last. Since the start of the summer, expected interest rates have fallen significantly in most major economies, …
28th August 2024
Brazilian assets have generally underperformed other EMs so far this year, but measures of risk premia still appear low to us, especially given concerns over public finances. While bonds may offer large gains by end-2025, our downbeat view on commodity …
20th August 2024
While expectations for interest rates in the UK have already fallen by 40bp by end-2025 since mid-July, our projections for UK CPI inflation to remain below the 2% target for much of 2025 and 2026 suggest to us that the Bank of England (BoE) will ease …
15th August 2024
Conditions have stabilised after a turbulent few weeks in financial markets, and we expect the rebound in equity markets over the past week or so to continue. Our assessment is that the market fallout from the weak early August US data was …
Equity markets in East Asia suffered very sharp declines earlier this week, but have generally recovered partially since. We think the rebound has scope to go a lot further as recession fears in the US prove overblown and an AI-related bubble reflates, …
9th August 2024
Our view on emerging market local-currency government bonds is broadly upbeat for the next year or so. We think returns will be largest, in common-currency terms, in Emerging Asia. It’s been a mixed year so far for local-currency sovereign bonds in …
31st July 2024
We think that a second term for President Trump would probably worsen the outlook for sustainable energy equities at the margin, and also add to the pessimism around stocks in the beleaguered electric vehicle (EV) sector. We expect that both supply and …
25th July 2024
The results of France’s parliamentary elections mean it should avoid the large, unfunded fiscal expansion that two of the three major political groups were advocating. But it also means France is very unlikely to be able to reduce the deficit as required …
8th July 2024
This Update summarises the answers to some of the questions which clients raised in our recent online briefing about the forthcoming French legislative elections. The questions are divided into three sections: politics, economics, and markets. (The online …
24th June 2024
Recent political uncertainty in France has taken a big toll on equities there, but stock markets elsewhere in the euro-zone have generally avoided major selloffs. That’s broadly consistent with past episodes of country-specific flare-ups in the region, …
21st June 2024
We think the S&P 500 will make further gains over the coming months, even though it’s already fared well this year and is approaching our existing end-year forecast. As such, we’ve revised that forecast up. Meanwhile, we think equities elsewhere will …
We doubt the outcome of the UK’s general election will have a big impact on UK equities in general. Nonetheless, we still expect them to continue to underperform US equities. We don’t think the Labour Party’s return to power – which the polls suggest is …
13th June 2024
Although we expect equities in general to fare well over the next year or so, we think that falls in most commodity prices will weigh on the energy and materials sectors. That would be bad news for stock markets with big energy/materials exposure and …
10th June 2024
Investors appear to have shifted their bets away from stocks expected to benefit from using AI and doubled down on those expected to benefit from enabling the AI revolution. But the bigger picture is that AI hype has been continuing to support the US …
6th June 2024
India’s election result isn’t, in our view, reason to turn downbeat on the country’s equity market, its wobbles earlier this week notwithstanding. But with a very positive story seemingly still priced in to India’s equities, both on the political and …
We think equities in the Asia-Pacific (APAC) region may benefit most from improving sentiment towards China in the near term. But we think that economic / market exposures to the AI revolution, not to China, will be the bigger influence on the relative …
23rd May 2024
Improving sentiment towards Chinese equities has sparked a further rebound over the past month, with stocks there having generally outperformed those elsewhere over this period. While we continue to see near-term upside, we think they will ultimately …
17th May 2024
This note answers some of the most frequently asked questions that we received from clients during a recent online briefing about the latest US tariffs on China. Watch the original briefing here . What has been announced? Yesterday was the end of a …
15th May 2024
We expect total returns from both US dollar-denominated, and especially local-currency (LC), emerging market (EM) sovereign bonds to trump, in general, those from US Treasuries in the next couple of years. Dollar-denominated and LC EM sovereign bond …
The shares of the very biggest, ‘mega-cap’, firms have generally outperformed those of smaller ones by less in Europe than they have in the US on net so far this decade. We expect that to remain the case through the end of 2025, as bond yields drop back …
10th May 2024
Despite the correction in equity markets over the past month, risk premia generally remain low across financial markets. While we expect this to continue as an AI-driven bubble inflates in equity markets, this Update explores four areas that could …
3rd May 2024
We envisage cyclical sectors generally continuing to outperform defensive ones in the S&P 500 through the end of 2025. That reflects our view about the economic outlook; our expectation that hype around artificial intelligence (AI) will grow; our forecast …
2nd May 2024
We think the recent recovery in the share prices of some of the ‘Magnificent 7’ is a sign that the earlier pull-back in their collective performance wasn’t a harbinger of a far bigger correction in the NASDAQ 100. On the contrary, we suspect that index …
26th April 2024
Higher Treasury yields, a resilient US economy, and relatively low valuations are three reasons why we now think that the future for US banks in general is a bit brighter. The share prices of banks in the S&P 500 have underperformed the overall index …
19th April 2024
Many of the usual relationships between oil prices and equities haven’t held over recent months. This Update explores the reason for that, and what may lie in store for energy equities and the broader market. Since troughing on 12 th December 2023, the …
16th April 2024
We think ‘value’ stocks will generally underperform their ‘growth’ counterparts while a bubble in the US stock market continues to inflate, even if Treasury yields don’t drop back in the way that we expect. Depending on your perspective, value stocks – …
12th April 2024
