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Another January price surge has sparked a sell-off in US stocks and bonds, and supports our view that further Fed rate cuts are off the table this year. While we think US equities will resume their rally soon , we expect Treasury yields to rise a bit …
12th February 2025
A slowdown in the economy, alongside an unfavourable external environment, have contributed to declines in the Indian stock market and the rupee. We continue to expect the stock market to fall further and we now expect a further decline for the Indian …
Although the 10-year TIPS yield has fallen on net since the start of this year, we doubt it will drop to an even lower level by the end of 2025. That’s because we don’t expect the slight further policy easing discounted in money markets to materialise. …
11th February 2025
Gold has soared to another record high today amid a further ratcheting up in trade tensions. However, we think the rally may falter before too long . Gold has climbed by ~1.5% so far today, which has taken it over the $2,900/oz mark for the first time …
10th February 2025
January’s strong US employment report supports our view that the Fed will stay on the sidelines during the rest of 2025, as well as our forecast that the 10-year Treasury yield will end the year higher. The employment report pointed to the labour market …
7th February 2025
The dollar’s boost from tariff announcements last weekend proved short-lived and, despite rallying a bit in response to the latest Employment Report , the greenback is set to end the week lower against most currencies. It’s clearer than ever that …
We expect the Bank of England to cut faster and further than investors expect, pushing Gilt yields down and in turn weighing on the pound. The Bank of England (BoE) cut its Bank Rate by 25bp to 4.5% today, as widely expected. Even so, the tone of the …
6th February 2025
Tariffs could continue to be a big challenge to China’s renminbi and stock market, but we think both could have a tough year regardless of how trade tensions play out. It was a slightly rough start to the Year of the Snake for China’s onshore financial …
5th February 2025
While we expect the US to start a trade war this year, we doubt that the initial reaction to the tariffs on Monday will necessarily set the tone for 2025. To re-cap, US President Donald Trump announced tariffs on imports from Mexico and Canada over the …
4th February 2025
US President Trump has ended weeks of speculation and announced tariffs on Canada, Mexico, and China. We think there are a few points to note on their implications for global markets. First, despite the big moves so far, investors still seem to be holding …
3rd February 2025
The dollar looks set to come out on top against most currencies after a week of central bank meetings, corporate earnings and economic data generally shifted yield gaps in its favour and reinforced US exceptionalism. But it is US trade policy that has …
31st January 2025
We don’t think US equity market outperformance is over yet, despite the challenge from DeepSeek. The tone in US equity markets has turned more positive lately, with a modest gain on Thursday and futures pointing (at the time of writing) to another in …
Even though we forecast the 10-year Treasury yield to end 2025 close to its current level, we anticipate that the 10-year Bund yield will fall over the rest of the year as the ECB, unlike the Fed, cuts policy rates further than currently discounted in the …
30th January 2025
While there has not been much market reaction to the speech that UK Chancellor Rachel Reeves delivered today on how to “kickstart economic growth” , we are still quite optimistic about the long-term prospects for UK equities. Some of the key announcements …
29th January 2025
We think it’s too soon to say whether this is the start of a slump for those large US firms which have benefited most from AI hype until now – but if it was, what would it mean for the S&P 500? Our sense is that the index would slip this year, but that …
28th January 2025
News that Chinese start-up DeepSeek’s AI Assistant has usurped US OpenAI’s ChatGPT as the most downloaded free app on Apple’s App Store has dealt the US stock market a blow today, just a week after Stargate was launched to much fanfare. Exports from the …
27th January 2025
The dollar is ending President Trump’s first week back in office on the backfoot. Between the absence of immediate tariffs in this week’s flurry of executive orders, Trump’s renewed attacks on the Fed, and some improved PMI surveys in Europe, the dollar …
24th January 2025
We think further tightening by the Bank of Japan will see the 10-year Japanese government bond (JGB) yield rise above that of the 10-year Chinese government bond (CGB), for the first time in more than two decades. The Bank of Japan’s rate hike today had …
Although developed market (DM) equities outside the US have purportedly benefited from bargain hunting recently, we doubt they will outperform their counterparts in the US over the course of 2025 as a whole. MSCI’s World ex USA Index of DM equities has …
23rd January 2025
We held an online briefing yesterday on Mexico’s economy and how it may be impacted by the Trump administration. (Listen to the on-demand recording here .) This Update answers some the key questions that came up. How do you interpret the threatened 25% …
Donald Trump’s ringing endorsement of Stargate is another shot in the arm for Artificial Intelligence (AI) in the early days of his second presidency, and supports our long-standing view that the S&P 500 will thrive in 2025 amid growing investment in, and …
22nd January 2025
Contradictory signals around the Trump administration’s plans for tariffs are an early indication that, at least in some ways, Trump’s second term will probably resemble the first. To recap, yesterday saw a sharp sell-off in the US dollar after reports …
21st January 2025
Fresh reports that President Trump will not impose tariffs on Day 1 mean that his inauguration has, quite fittingly, coincided with a volatile day across financial markets. Although we suspect that a fair degree of volatility will persist for a while yet, …
20th January 2025
Despite further large swings in bond markets this week, moves in currency markets have for the most part remained relatively muted ahead of Donald Trump’s inauguration next week. The dollar is broadly flat on the week as a whole, even after a relatively …
17th January 2025
Equities in Europe have done well so far this year, but we expect them to trail those in the US over the rest of 2025, as the US imposes universal tariffs and enthusiasm about AI returns. This would also mean “big-tech” sectors returning to the front of …
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 …
The Japanese yen has been boosted by the dip in US Treasury yields, and we think it will rally a bit further against the US dollar over 2025. One of the key beneficiaries of the dip in US Treasury yields since the December US CPI print has been the yen, …
16th January 2025
Today’s release of US CPI data for December did not change our view that the Fed will cut its policy rate by a bit more than investors anticipate, and in turn that Treasury yields will edge down further. Although the data were broadly in line with …
15th January 2025
Donald Trump’s election win two months ago has already contributed to a rally in the US dollar, and we think there is a bit more to come this year. More broadly, the second Trump administration will probably be a key driver of volatility in currency …
It’s easy to forget the importance of earnings in influencing the S&P 500 when its performance is driven instead, as has been the case recently, by gyrations in the Treasury market. Earnings will be front of mind again tomorrow, though, when reporting …
14th January 2025
We think the recent falls in US equities will unwind before long, with growth and cyclical stocks leading the charge. The sharper ~3% fall in the Russell 2000 index of small-cap (SC) US stocks than the ~2% fall in the S&P 500, its large-cap (LC) …
13th January 2025
The Brazilian real plunged in 2024, due to fiscal risks. While we suspect that further piecemeal austerity measures will prevent another leg down in the currency, with investors’ fiscal fears unlikely to be fully addressed and Brazil’s terms of trade set …
2025 is off to a hot start, with plenty of volatility across financial markets over the first full week of the year and the US dollar rallying on the back of a blockbuster US non-farm payrolls report today , continuing where it left off in 2024. The …
10th January 2025
Good news has (once again) proved to be bad news for markets, with Treasuries and equities selling off in response to the strong US payrolls report. But we don’t expect this twin sell-off to persist over 2025. December’s blockbuster US employment report …
UK Gilts have not only been embroiled in a global government bond sell-off, but they have fared worse than others. However, we think that bonds will recover before long, with yields in the UK falling particularly sharply by the end of this year. The …
9th January 2025
Although the Korean won has strengthened this year, we think its rally will unwind before long. The Korean won appears to have embarked on a relief rally lately, bucking the trend of broad US dollar strength. Admittedly, it edged down slightly against the …
8th January 2025
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
US Treasury yields have surged recently, pulling yields elsewhere up, but we doubt they’ll continue their upward march during the rest of 2025. Long-term Treasury yields have risen further today following the release of the ISM Services Report for …
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 …
Chinese government bond yields have tumbled in recent weeks and we think that has a bit further to run. This fall in yields, alongside our view that US tariffs will be imposed, help inform our forecast for the renminbi to weaken to 8.0/$ by the end of …
6th January 2025
The US dollar has started the year on the front foot. We expect that to continue as the US economy and stock market outperform again while the incoming Trump administration brings in tariffs. While US continued exceptionalism and higher tariffs by now …
3rd January 2025
After a stellar 2024, we expect another strong year for US equities in 2025, on the back of continued enthusiasm about AI and US exceptionalism. Meanwhile, we think equities elsewhere will generally fare poorly, owing to another trade war. The S&P 500 has …
2nd January 2025
The FOMC’s hawkish surprise earlier this week has allowed the dollar to break through the top of its post-2022 range, putting it firmly on the front foot going into 2025. (See Chart 1.) With the BoJ and the BoE both striking a more dovish tone, as most …
20th December 2024
W e are sticking to our forecast that the S&P 500 will end next year at 7,000 , despite its slump since this week’s FOMC meeting. That’s even though we think Fed policy will be a bit less accommodative than we had previously projected , and the risk of a …
We think 2025 will be a better year for the Japanese yen against the US dollar than 2024 has been, as the relative monetary policy picture shifts more decisively in its favour. A Fed cut and a hold from the Bank of Japan (BoJ) might seem like a surprising …
19th December 2024
UK equities have kept up with other non-US ones in recent months despite a string of weak domestic activity data and stubborn inflation pressure. We think they will outperform most non-US markets in 2025, with the FTSE 100 hitting 9,000 by end-2025. The …
18th December 2024
We expect the US dollar to appreciate a bit further in 2025 as the US economy and stock market continue to outperform peers and president-elect Donald Trump brings in extensive tariffs next year. As widely anticipated, the Republican sweep in the November …
17th December 2024
We think corporate credit spreads in the euro-zone will widen only slightly next year, despite dim economic prospects. Corporate credit spreads, as captured by the option-adjusted spreads (OAS) of ICE BofA Corporate Investment grade (IG) and High Yield …
While equities in Germany have managed to ride out weak growth and political uncertainty this year, those in France have not. We suspect that they will all fare poorly next year, as those adverse conditions remain and a trade war takes a toll. Today …
16th December 2024
Halfway through the December round of central bank policy announcements the US dollar remains on the front foot, with the DXY index again close to its post-2022 high. Arguably, the dollar’s strength this week mainly reflects continued disappointing news …
13th December 2024
