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We think the current backdrop is not as favourable for the greenback as the one that prevailed during the dot com era, so we doubt the bubble in US equities we expect would be accompanied by renewed strength in the dollar over the next couple of years. …
25th January 2024
While the dovish reaction to today’s ECB meeting came as a bit of a surprise, we continue to think that the direction of travel for Bund yields – and most sovereign bond yields – will be down this year. Today’s ECB meeting played out broadly as had been …
This is a special Global Economics Chart Pack that provides clients with key analysis to make sense of the macro and market impact of the disruptions to maritime shipping. The charts in this document come from our brand-new shipping dashboard , which …
While we expect equities around the world to rebound – as a stock market bubble inflates on the back of growing hype around AI – we suspect that Latin American stock markets will keep lagging. Global stock markets are not off to a great start this year. …
24th January 2024
Although the Bank of Japan (BoJ) stood its ground at its meeting today, we still expect it to hike its policy rate before long; that, we think, could contribute to a higher 10-year JGB yield. The BoJ didn’t make much of a splash in markets earlier today …
23rd January 2024
Judging by the latest rally in some ‘big-tech’ sectors, renewed hype around Artificial Intelligence (AI) seems to explain why the S&P 500 has just racked up a new record high despite a recent rebound (if not today) in the 10-year Treasury yield. (See …
22nd January 2024
The US dollar’s rebound has gained momentum this week amid hawkish rhetoric from Fed officials and more evidence out of the US – notably retail sales and jobless claims – of continued resilience in the economy there. So far this year, currency markets …
19th January 2024
US large caps have vastly outperformed UK ones over the past year or so, but that is skewed by the performance of the biggest names on both sides of the Atlantic. Indeed, there is little difference between the two markets on an equal-weighted basis over …
We project decent near-term gains in China’s equities, think long-dated CGB yields will finish the year around their current levels, and expect the renminbi to rally against the US dollar. China’s equity, bond, and FX markets were on the back foot …
Although Gilt yields remain elevated and sterling resilient, we expect both to fall over the course of 2024 as disinflationary pressures build in the UK. Data out of the UK released so far this week have indicated mixed progress on the goal of bringing …
18th January 2024
We still forecast the renminbi to make ground against the US dollar by the end of this year, despite the seemingly stiff headwinds it faces. China’s equities and currency were back under pressure today, after the country’s Q4 activity data underwhelmed …
17th January 2024
A hawkish mood has prevailed in markets this year, and comments from the Fed’s Waller today seemed to add fuel to that fire, at least initially. But given how aggressively rate cuts were priced in late last year, investors are still discounting a huge …
16th January 2024
While sterling has outperformed other G10 currencies amid the dollar sell-off over the past couple of months, we expect it to reverse its gains against the greenback as short-term Gilt yields edge lower. So far this year, the pound has held up well …
Government bond yield curves in the US, Germany, and the UK seem to be once again on the path towards “normalisation”, or “disinversion”, as short-term yields are close to breaking below long-term ones. And while we think that 10-year yields will drop …
15th January 2024
In contrast to 2023, we expect a strong showing from UK equities this year, helped by a weaker pound and enthusiasm around AI technology. UK’s FTSE 100 started the day with a ~1% jump, after GDP data for November released this morning came in a bit above …
12th January 2024
After a strong start to the year, the US dollar seems set to end the week broadly unchanged against most currencies, as inflation data releases out of the US this week failed to generate much of a reaction. This stalemate in currency markets has been a …
We think that most major currencies in Latin American will fall against the US dollar this year. As a result, the relatively poor returns that we expect from equities in the region in local-currency terms are likely to be even worse in US dollar terms. …
We wouldn’t be surprised if US bonds and equities fell a bit further in the near term. But, in our view, the Fed remains on track to start easing in March, pointing to renewed gains in US asset prices. December core CPI data out of the US, released …
11th January 2024
We still think that China’s equities could fare well relative to others in the near term, but also that their longer-run prognosis is fairly bleak. The challenging times for China’s stock market have continued today, with the country’s major indices …
10th January 2024
A continued pull-back in the spreads of US private-label commercial mortgage-backed securities (CMBS) since the start of 2024, at a time when those of US high-yield corporate bonds have edged up (see Chart 1) and “risky” assets in general have come under …
9th January 2024
Despite bouncing back a bit in recent days, the spreads of corporate bonds remain near their lowest levels in two years, making them vulnerable to a deterioration in economic conditions. Financial markets are starting the year on the back foot. After a …
8th January 2024
The dollar’s strong start to 2024 has partly reversed today as the surprisingly weak US ISM non-manufacturing survey has more than offset another robust US non-farm payrolls report . Even so, the greenback remains up on the week as interest rate …
5th January 2024
Today’s plunge in the employment component of the US ISM services survey more than took the shine off a slightly stronger than expected US Employment Report . In doing so, it appears to have called at least a temporary halt to the recent correction in the …
While we estimate the US dollar remains only somewhat above “fair value”, the valuations of some other major currencies are at extreme levels. For these currencies – notably the Mexican peso and Czech koruna – we think reversion towards fair value could …
4th January 2024
We expect the Japanese yen to make larger gains this year than the Chinese renminbi. The yen and the renminbi, which had rallied over November and much of December, have begun the year on the back foot. Soft PMIs in China earlier this week (even though …
With most major bond and equity markets on track for a second down day to start the new year, it’s fair to say that financial markets have started 2024 with something of a mild hangover. While reading too much into the first couple of days in the working …
3rd January 2024
Both bond and equity markets have started the year on the back foot. But, while a pause after the rapid rally in most asset prices over the last two months of 2023 would not be surprising, we think the outlook for both bond and, especially, equity prices …
2nd January 2024
The final week ahead of the holiday period is drawing to an end with the US dollar somewhat weaker across the board. Unlike last year, the BoJ’s final policy meeting proved a(nother) damp squib, with policymakers equivocating somewhat on the timing of …
22nd December 2023
We think “risky” assets could struggle relative to “safe” ones in the near term if, as we expect, growth disappoints, although we still think they’ll outperform over next year as a whole. At the time of writing, Thursday’s drop in equity prices had …
21st December 2023
As the year draws to a close, this Update sets out our answers to five of the most commonly asked questions about currency markets for the coming year. In short, we expect another year of muddling through for the dollar, a rebound in the yen, and growing …
20th December 2023
While the valuation gap between “growth” and “value” factors in the US is high by past standards, we suspect that “growth” will generally keep outperforming in the next year or two. Since the start of this year – and as was the case between the Global …
We think the 10-year Japanese government bond (JGB) yield will rise over 2024 as the Bank of Japan (BoJ) lifts its policy rate early next year and c onstraints on the JGB market ease . And while that may exert some upward pressure on bond yields in other …
We expect the 10-year Japanese government bond (JGB) yield to rise next year, as the era of negative interest rates there comes to an end and constraints on the bond market ease. And w e think the yield gap vs the US will shift further in favour of the …
19th December 2023
Fed officials have pushed back a bit against market bets for rate cuts today, helping to send yields a bit higher. But the bigger picture is that there has been a massive reassessment of the timing and extent of rate cuts in key economies over the past …
18th December 2023
The Fed’s shift away from its “higher for longer” messaging (and European central banks attempts at maintaining a hawkish stance) pushed relative interest rate expectations against the US dollar, leaving it weaker against nearly all major currencies this …
15th December 2023
We think China’s equities could outperform those elsewhere in the near term, but suspect their longer-run outlook is fairly bleak. China’s equities got a bit of a boost earlier today from the country’s November activity data, which showed a healthy …
While central banks remain reluctant to declare victory over inflation just yet, bond markets appear more than happy to do so on their behalf. With most of the policy rate cuts which we forecast over the next couple of years now already discounted, we now …
14th December 2023
Investors have revised down their expectations for the Fed funds rate a long way in recent weeks. But we think that shift will continue in the coming months, pushing Treasury yields down further. With a broad consensus that the FOMC will leave the Fed …
13th December 2023
The US dollar has reversed around half of the gains it made from mid-July to end-October amid a sharp fall in US Treasury yields and a general compression of risk premia across markets, leaving the greenback, in aggregate, roughly where it started the …
While US inflation for November was almost exactly as the analysts’ consensus had predicted, the yields of long-dated government bonds still rose a bit on the news in most places. But we continue to think that yields will generally fall over the next year …
12th December 2023
The US dollar and the prices of major commodities, in aggregate, have often risen and fallen in tandem since 2021, in contrast to their strong inverse relationship for much of the past two decades. While we wouldn’t go as far as classifying the greenback …
While the gold price has retreated over the past week or so, we think it is set for a renewed rally next year as the Fed cuts interest rates and long-term real yields fall back further. After a strong run over recent months, the gold price has dropped …
11th December 2023
The greenback has rebounded this week on the back of another batch of robust data out of the US economy, including today’s non-farm payrolls report . That stands in sharp contrast to the continued weakness in the euro-zone, where data on the German …
8th December 2023
The global bond rally faced a setback today after the US employment report was released. But we think that yields will resume their downward march before long in most places, including the US. One exception is Japan, where we expect they will rise over …
We expect the US dollar’s resilience to fade over the next year or so, and forecast it to weaken against most major currencies. There’s been something of a return of the “heads I win, tails you lose” story for the US dollar lately. The “higher for longer” …
7th December 2023
While government bond yields continue to plunge and the main euro-zone equity index has risen to a new high, the rally in US equities has stalled over recent days and the dollar recovered some ground. This suggests to us that the resurgent optimism in …
6th December 2023
Although the relative performance of the three “big-tech” sectors of the S&P 500 has underwhelmed recently, we suspect that they will be at, or near, the front of the pack again in 2024. While the three big-tech “growth-heavy” sectors that contain the …
5th December 2023
Although the spread between the 10-year German and Swiss government bond yields has widened significantly over the past couple of years, we think it will stay close to this level for a long while yet. The soft Swiss CPI data released today has added to …
4th December 2023
Our view about relative economic and interest rate prospects in Sweden and the euro-zone suggests that the Swedish krona’s recent rebound may prove durable. In fact, given how far below “fair value” it appears to us, we think that the krona will rise …
The greenback’s grind lower has continued this week amid falling US Treasury yields and strong appetite for risk. While comments from numerous Fed speakers (including Chair Powell today) continued to point to an extended pause, PCE data and November’s …
1st December 2023
