Filtered by Subscriptions: Asset Allocation Use setting Asset Allocation
With yet more disappointing news about China’s economic rebound, it is worth taking stock of the headwinds facing the country’s equity market. For a start, the market reaction to the release of China’s Q2 GDP data has been fairly limited, both in Chinese …
17th July 2023
Equity, bond, and FX investors seem to have shrugged off the recent rise in oil prices. We wouldn’t be surprised if that continued even if prices rose further. Although they’ve taken a breather today, oil prices have been on a tear lately. WTI, which had …
14th July 2023
June’s soft US CPI print seems to have given investors renewed hope that inflation could fall back to normal levels without the economy slowing too much, if at all. We continue to think that the chance of a more-significant economic slowdown is …
13th July 2023
Renewed murmurs of additional tweaks to the Bank of Japan’s (BoJ) Yield Curve Control (YCC) policy are giving further impetus to the yen’s recent rally. Though we forecast the yen to strengthen against the dollar this year, that forecast is driven mainly …
Not so long ago, a higher 10-year TIPS yield almost invariably meant an underperformance of US “growth” stocks vis-à-vis their “value” peers, a lower gold price, and a stronger dollar. That’s changed in 2023, though, with the relationships weakening …
Bigger falls in US core inflation than in the euro-zone or UK might mean government bond yields decline a bit more quickly in the US over the rest of this year, but ultimately we expect yields to fall in all three economies over time. June’s US CPI data …
12th July 2023
Given our view that a big stock market rally fuelled by enthusiasm about AI is on the way, we expect equities in some IT and industrials subsectors to outperform, which would favour the US market. Equities in the US have fared markedly better than those …
Enthusiasm around artificial intelligence (AI) seems to have waned a bit recently, and it may continue to do so if, as we expect, growth struggles later this year. But we think that it will resume sometime in 2024 and push the S&P 500 much higher. Over …
11th July 2023
Our Long Run Returns Monitor provides our updated long-term projected returns for major asset classes. All projections in this publication are as of 7th July 2023. We publish more detailed explanation of our views in our annual Long Run Asset Allocation …
There were two intriguing developments in bond markets last week, as the 10-year Treasury yield surged above 4% to its highest level since March. The first was a similar-sized increase in the 10-year Bund yield, to more than 2.6%. Th e second was an ~20bp …
10th July 2023
Signs the US labour market is beginning to loosen support our view that bond yields and equities could fall further, while the greenback could rally. Labour market data out of the US over the past two days has sent mixed messages : yesterday, the ADP …
7th July 2023
We still think the yields of long-dated sovereign bonds in Canada, Australia and New Zealand will fall by the end of this year, but no longer expect them to do so by much more than the yields of bonds elsewhere. Canada, Australia and New Zealand have led …
We still think a recession is on the way in the UK, and that it will bring gilt yields back down. Developed market sovereign bond yields have been on the rise again so far today , as investors have continued to price back in the “higher for longer” …
6th July 2023
Although we expect emerging market (EM) policy rates to fall vis-a-vis the US this year, we don’t expect EM local-currency sovereign bonds to outperform US Treasuries until global growth picks up over 2024. EM central banks have generally shifted into …
5th July 2023
The valuations of equities are, in general, still a long way from being unprecedently high compared to those of government bonds. There are umpteen ways to compare the valuations of equities and government bonds. One recent development in the UK to catch …
China has stepped up its support of the renminbi, which has rebounded over the past couple of days. This may well prove a turning point for the currency. Three key points are worth emphasising. First, China’s approach to managing its exchange rate has …
4th July 2023
US stock markets ’ gains in recent months , both in absolute terms and relative to their European peers, owe a lot to their rising valuations. But equities in the US are now arguably quite highly valued, which in our view will contribute to them …
3rd July 2023
Reconciling the slide in Japan’s currency with big flows into its stock market from abroad and a perception that the appeal of foreign bonds to Japanese investors has waned in response to high hedging costs is easier to do once securities transactions …
30th June 2023
“Risky” assets are clearly leading “safe” assets as we approach the halfway point of the year. But with recessions looming, we expect souring risk appetite to turn the game on its head in the second half. At the start of this year, many – including …
The Riksbank’s curious communication choices around its foreign exchange reserves earlier today highlight both the challenges depreciating currencies pose to policymakers and the particular vulnerability of the Swedish krona. To recap, the Riksbank hiked …
29th June 2023
We expect the yen ’ s weakness to reverse before long, weighing on the country ’ s stock market. And while the latter might hence hold up a bit better in US - dollar terms, we doubt it will do especially well. Today ’ s gains add to what has been a great …
28th June 2023
Click here to read the full publication. Q2 looks set to go down as a decisive victory for “risky” assets over “safe” ones, thanks in large part to euphoria in the stock market over Artificial Intelligence (AI). But we suspect that the story over the …
27th June 2023
Latin American equities have, in US dollar terms, fared even better than their US peers so far this year. We think that their outperformance will be interrupted by the global “risk-off” environment we anticipate over the rest of this year, but suspect the …
Limited fallout from tensions in Russia, for now The Wagner mutiny in Russia this weekend seems to have ended as quickly as it escalated, having had far less impact on global financial and commodity markets than Russia’s invasion of Ukraine last year. …
26th June 2023
Lower-than-expected euro-zone PMIs in June support our view that economic activity will disappoint, which we think will push the euro and government bond yields down by the end of 2023. Underwhelming PMIs in the euro-zone have put some pressure on the …
23rd June 2023
A disparate range of global central banks have delivered their latest policy rate verdicts over the past 24 hours. We think there are four key points for investors to note. First, European central banks are clearly still in hawkish moods. But while that …
22nd June 2023
Yet another upside surprise to UK inflation today has put the spotlight squarely back on Gilts and sterling, both of which have come under pressure ahead of tomorrow’s Bank of England policy announcement. There are four key points to consider for the …
21st June 2023
Since bottoming out late last year, European and US equities have fared comparably in local-currency terms, and European stocks have even outperformed in dollar terms. Looking ahead, however, we think that the lack of AI (or indeed tech) “champions” in …
20th June 2023
While the AI revolution has prompted us to revise up our forecasts for US equities today, we don’t think it changes the outlook for US corporate credit spreads much. We think spreads still look too low. Much has been written about the fact that the …
We don’t think growing enthusiasm about AI will be enough to stop the S&P 500 from declining if, as we expect, the US economy falls into recession later this year. Nonetheless, we now think the index will end this year a bit higher than we’d previously …
The greater inversion of yield curves, in response to the prospect of higher-for-longer interest rates, suggests to us the strength of equities won’t last. To re-cap, yield curves have recently tended to become more inverted on both sides of the Atlantic. …
19th June 2023
We think the Bank of England will hike its policy rate by another 25bp, to 4.75%... (Thu.) …while Turkey’s new central bank governor will kickstart a rapid tightening cycle (Thu.) The euro-zone composite PMI probably ticked down in June but remained above …
16th June 2023
We now suspect growing euphoria over AI will drive the S&P 500 to a significantly higher level than we had previously forecast by the end of next year. In the meantime, though, we still think a mild economic downturn may take some heat out of the stock …
We expect the BoJ to leave its policy settings unchanged on Friday US consumer confidence may have risen in June, but probably remained weak (15.00 BST) Sign up to our Drop-In to digest next Thursday’s BoE meeting here Key Market Themes While the ECB …
15th June 2023
Although we no longer expect Gilts to outperform in local-currency terms, we do think they’re set to hold up better against Treasuries and Bunds over the rest of this year than they have done lately. Gilts have seen a renewed sell-off lately. The 10-year …
The Fed is likely to “skip” a hike (Wednesday) ECB policymakers will probably raise their policy rates by 25bp (Thursday) We expect the PBOC to lower its 1-year MLF rate from 2.75% to 2.65% (Thursday) Key Market Themes Investors may be right about the …
14th June 2023
We think UK real GDP rose a bit in April (07.00 BST) Euro-zone industrial production probably edged up in April (10.00 BST) We expect the Fed to leave interest rates unchanged (19.00 BST) Key Market Themes The 10-year Gilt yield has continued to march …
13th June 2023
UK wage growth probably accelerated in April (07.00 BST) We think US core inflation eased to an 18-month low of 5.2% in May… (13.30 BST) … and the headline inflation rate may have fallen to 4.1% (13.30 BST) Key Market Themes Emerging Market (EM) …
12th June 2023
We think US core inflation slowed from 5.5% to 5.2% in May (Tue.) We expect the Fed to leave its policy rate on hold this week, but hike in July (Wed.) ECB will probably deliver another 25bp rate hike but BoJ set to leave policy on hold Key Market Themes …
9th June 2023
Although we think that the Fed is set to end its tightening cycle in July, we aren’t convinced that 10-year Treasuries will outperform 2-year Treasuries in the way that they have after recent Fed tightening cycles. We expect the Fed to wrap up its …
Although a lot of bad news now appears to be priced into US equity office REITS, the sector still faces significant challenges. This suggests to us that a material improvement in its fortunes is not likely soon. US equity REITs in aggregate have …
8th June 2023
We think Peru’s central bank will leave its policy rate on hold (00.00 BST) Inflation in China was probably very low last month… (02.30 BST) … but we think it remained elevated in Norway (07.00 BST) Key Market Themes After sitting out most of this year’s …
We expect the RBI to keep interest rates on hold on Thursday (05.30 BST) A revision to euro-zone Q1 GDP could show the bloc in a technical recession (10.00 BST) Sign up for our Drop-In to unpack the major June central bank meetings here Key Market …
7th June 2023
Australia’s central bank hiked rates on Tuesday while policymakers in Poland stood pat We expect the Bank of Canada to raise its policy rate by 25bp to 4.75% (15.00 BST) Trade data from the US and China likely to show a fall in exports in both countries …
6th June 2023
We expect the RBA to hike by 25bp (05.30 BST) By contrast, Poland’s central bank will probably leave rates on hold Euro-zone retail sales are likely to have stagnated in April (10.00 BST) Key Market Themes OPEC+ ’s decision over the weekend to cut oil …
5th June 2023
We think May’s ISM Services Index remained broadly consistent with stagnant US GDP (Mon.) We expect policy rate hikes of 25bp from Australia’s central bank, to 4.10%... (Tue.) … and from the Bank of Canada, to 4.75%(Thu.) Key Market Themes Despite the …
2nd June 2023
In a recent Global Markets Update , we analysed the remarkably narrow rally in the S&P 500 so far in 2023. We concluded that recent history supported our forecast that the rally will run out of steam before long, albeit with the largest firms potentially …
We think Korea’s inflation fell in May, in line with weaker economic growth (00.00 BST) The US labour market probably loosened further last month (13.30 BST) Watch back today’s Drop-in on the outlook for EM equities on demand here Key Market Themes …
1st June 2023
We don’t think that the recent strong gains in Japan’s equity market mark the start of a significant reversal of its decades-long underperformance; we expect it to lag other markets over the rest of this year in local-currency terms and to perform broadly …
Aside from the US stock market – which is being propped up by a handful of big name stocks and a serious dose of AI fever – most risky assets have struggled over the past month or so . (See Chart 1.) We don’t think that owes much to the back-and-forth …
