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The UK is likely to get to the other side of US tariffs unscathed compared to other economies . That’s because the UK’s services exports to the US (likely exempt from higher tariffs) are twice the size of its goods exports to the US and are likely to be …
28th March 2025
Given our view that the rise in yields outside Germany will not match the recent increase in Bund yields anytime soon, we are revising down our forecasts for euro-zone spreads. That said, we still expect spreads in France, Italy, and Belgium to widen due …
Equity investors have stopped ignoring US President Donald Trump’s tariffs announcements. We think they are right to do so. Donald Trump announced yesterday that all finished motor vehicle imports will be subject to a 25% tariff from next Thursday. This …
27th March 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 …
Despite saying the “world is changing”, the Chancellor, Rachel Reeves, today just tinkered with fiscal policy. This left the impression that bigger changes lie ahead. Indeed, the pressure to raise both defence and other public spending is only likely to …
26th March 2025
We think China’s tech stocks could rally a bit further yet, and perhaps outperform those globally for a while. The breakneck rally in China’s tech stocks has come to a shuddering halt lately. Thanks to a couple of sharp falls they’ve now made no ground …
While the drop and partial rebound in the US stock market over recent weeks has in many ways followed a familiar pattern, it has also seen some relatively unusual characteristics that point to the potential for a wider and sustained reset in financial …
25th March 2025
Environmental, Social and Governance, or ESG, investing has come under renewed pressure due to pushback from the new US president. Despite that, we think that demand for ESG investments is here to stay and that their performance won’t buckle much in the …
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. …
It is becoming clear that President Trump’s actions are driven by both his fixation on reducing the US trade deficit and his transactional approach to dealing with other countries. So, even though the Trump administration’s ideas to transform the entire …
Over the past month or so, economic data have generally surprised to the downside in the US, whereas they have done the opposite in the euro-zone. This may be one reason for the intervening shift in the performance of their stock markets. Admittedly, much …
24th March 2025
The prospect of looser fiscal policy in Germany isn’t the only significant reason MSCI’s Europe Index has outperformed its USA Index since Donald Trump returned to the White House. The ‘big-tech’ sectors’ fall from grace in the US has also been very …
21st March 2025
Our interactive ‘Corporate Bonds” dashboard features many of the charts shown in this report and more. It will be updated on a regular basis with our latest insights and forecasts. We don’t think US high-yield (HY) spreads would fall all the way back …
20th March 2025
We still expect Treasury yields to rise by the end of the year, despite the seemingly reassuring news for bonds from the Fed on Wednesday. There were, at face value, a few things for Treasury investors to take heart from in the latest Fed meeting. The …
News that Turkey’s main opposition leader has been arrested today raises concerns over a potential return to unorthodox economic policy in Turkey. While the risks to our relatively upbeat view on Turkey’s financial markets have plainly increased, we think …
19th March 2025
The recent slump in the S&P 500 raised the spectre of a bear market. But even if one happened this year – rather than next year as we have been tacitly assuming in our forecasts – in response to the bursting of a bubble in Artificial Intelligence (AI), we …
A big spending plan nears in Germany, but that might not mean higher yields or a stronger euro. Germany’s Bundestag, the federal parliament, has agreed today to reform the “debt brake”, the strict constitutional fiscal rule that notably prevents the …
18th March 2025
While a notable shift in Canadian fiscal policy is likely regardless of who wins the upcoming election, we doubt this will move the needle for the loonie or Canadian government bonds, given that the outlook for Canadian financial markets depends more on …
Lingering fiscal risks in South Africa, alongside the challenging global backdrop, prompt us to expect a dim outlook for the country’s bonds, equities and the rand over the rest of this year. The negative reaction in markets to rumours that South Africa’s …
The prospects for Chinese equities still appear quite bright to us, and in fact we expect that they will keep outperforming those in India over the rest of this year. Chinese equities were a bit of a mixed bag today. China’s offshore equity market …
17th March 2025
The yen shrugged off the results of Japan’s “Shunto” spring wage negotiations today, even though the unions’ demands for another year of strong wage growth were broadly agreed to by firms. That’s not too surprising: it’s been clear for some time that …
14th March 2025
While today's US PPI print supports our view that the Fed will stand pat this year, comments from central bankers in Canada and Japan suggest they may have different views about how over how to respond to the impact of US tariffs on domestic inflation and …
13th March 2025
Our Interactive Markets Chart Pack gives you a comprehensive and timely view of the latest developments in financial markets, and how we expect them to perform in 2025 and beyond. The Chart Pack can be downloaded in PDF form using the Download button on …
It’s little surprise that inflation data for February hardly moved the dial for the US stock market – that probably requires clarity on trade policy and signs of economic resilience. Our base case is that both of these will come in the coming months (even …
12th March 2025
As was the case last summer, we think the US stock market will bounce back from its “growth scare”, even if tariffs are involved this time around. After falling by 2.7% yesterday, the S&P 500 is down again today at the time of writing, bringing to about …
11th March 2025
We suspect the jump in bond yields in China will prove short-lived. Deflation reared its head in China again today, with the headline CPI printing at a lower-than-expected --0.7% y/y in February, emphasising, among other things, the problems the country …
10th March 2025
While heightened uncertainty and worries about the US economy may keep investors on their toes for a while yet, we think the risk-on mood in markets will come back before the end of the year. The US Employment Report for February , released today, …
7th March 2025
The shift in the ECB’s tone today to acknowledge the increased uncertainty surrounding the outlook has pushed euro-zone bond yields up slightly, extending their surge over the past few days. Given recent developments, we have raised our forecasts for the …
6th March 2025
The unravelling of US exceptionalism in stock markets since Donald Trump returned to the White House on 20 th January has been mainly driven by concerns about the US’ dominance of AI and the relative health of its economy (which has also dragged down …
In this Update , we put into context the recent surges in Bund yields, German equities, and the euro that have been triggered by expectations of a significant loosening of fiscal policy in Europe’s biggest economy. We have discussed here the economic …
We don’t see anything in the outcomes of China’s NPC meetings to abandon our upbeat near-term view on the country’s stock market. China’s equities have been pushed in all sorts of directions lately, albeit more up than down. Late last year there was the …
5th March 2025
President Trump’s decision to follow through with tariffs on Canada, Mexico and China, combined with further weak economic data in the US, has resulted in a further flight to safety across financial markets. That may well prove an overreaction – Trump …
4th 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 …
While the prospect of more defence spending in Europe is pushing up government bond yields there, we still expect Bund yields to fall back. Meanwhile, even if defence stocks in Europe kept outpacing those in the US, we doubt that would prevent the overall …
3rd March 2025
This week’s pull-back in the US stock market and the unravelling of US exceptionalism in equities since Donald Trump returned to the White House on 20 th January have been driven by growing concerns about two key risks that we highlighted here to our …
28th February 2025
The near-term picture for China’s equities looks brighter than we’d previously thought, and we’re revising up our forecasts for them significantly. But, we still think they will underperform those in the US, for example, over the remainder of 2025. …
Notwithstanding recent setbacks, we continue to think that this year will see a major rally in US equity markets, higher Treasury yields, and a stronger dollar. Many of the key trends in financial markets in the run-up to and immediate aftermath of the US …
27th February 2025
Despite growing concerns that tech stocks are "priced for perfection", and the ongoing threat of tariffs, we still expect the S&P 500 to rally over the remainder of this year. The muted after-hours reaction in Nvidia’s share price to yet another stellar …
The greenback has struggled over the past month or so, since President Trump took office. However, we think that a sustained fall in the dollar like that at the start of his first term remains unlikely. While the dollar has rebounded a bit today, it has …
26th February 2025
US Treasuries have continued to rally strongly today amid souring risk appetite. But we expect that the rally will reverse as Trump’s tariff policies prevent the Fed from cutting interest rates this year . Investor sentiment has taken a turn for the …
25th February 2025
The recent underperformance of US equities marks a notable shift in the global market environment – but is this just a temporary state of affairs or the new order of things? Chief Markets Economist John Higgins and Senior Markets Economist Hubert de …
Judging by the muted market reaction, investors don’t seem too bothered about the German f ederal election , which took place on Sunday. Notwithstanding the risk-off mood in global markets since the US open, which left Germany’s markets more or less …
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 …
Today’s inflation and PMI data in Japan bolster our view that the 10-year JGB yield will continue to rise. We are sticking to our forecast that it will end 2025 at 1.75%, as the BoJ tightens policy by more than is discounted in the money market. In …
21st February 2025
Germany’s next government looks set to cut taxes and, if the parliamentary maths allow, reform the constitutional fiscal rule. It is also likely to be firmer in its support for Ukraine even as support from the US wanes and to advocate an increase in EU …
20th February 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 …
We still think the PBOC will allow the renminbi to depreciate against the US dollar, perhaps quite significantly, by the end of the year. We suspect there are a few reasons that China’s central bank declined to cut its benchmark Loan Prime Rates today …
Although long-term government bond yields in developed markets (DM) have moved in tandem with those of US Treasuries in recent months, we think they will diverge in the coming months. 10-year government bond yields have risen across the board this week – …
19th February 2025
The decision by the US and Russia to “lay the groundwork” to end the war in Ukraine marks a potentially significant turning point after three years of conflict. Negotiations will take time and the macroeconomic implications will depend on the features of …
18th February 2025
Chinese stocks have generally outperformed those elsewhere in recent weeks amid signs that investors’ enthusiasm over AI is (belatedly) benefiting stocks there. While we agree that the outlook for equities in China has improved, we still think that they …
