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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
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 …
25th March 2025
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 …
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
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 …
19th March 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 …
24th February 2025
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 …
17th January 2025
In this Focus , we explain why we expect the S&P 500 to continue to thrive in 2025, after correctly predicting that it would soar in 2024 . We are sticking to our forecast that it will end this year at 7,000. One reason we expect the S&P 500 to rally this …
10th January 2025
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 …
7th January 2025
Despite being around multi-decade lows, we think credit spreads of US investment-grade (IG) corporate bonds could fall further still over the next year or so. Last month, the option-adjusted spread of the ICE BofA US IG Corporate Index reached its lowest …
12th December 2024
India’s stock market has had such a good few years that it started to raise concerns about whether it was in a “bubble”. And as it’s come under pressure recently, some have speculated that the bubble is bursting. For our part, we think that there are …
26th November 2024
We discussed the global impact of higher tariffs in a Drop-In on Tuesday, 26th November. Click here to watch the 20-minute online briefing. In this Focus, we construct a framework to explore the channels through which an import tariff works, which we use …
25th November 2024
We think that if Vice President Harris wins the US presidential election next week, she would be more likely to stick to policy continuity, and EM risk premia would remain low. If former president Trump is elected, we would expect an initial adverse …
1st November 2024
This Budget is big, both in the way it defines the government’s plans and the money it raises and spends. The key point is that it loosens fiscal policy relative to previous plans and is therefore consistent with GDP growth perhaps being a bit stronger …
30th October 2024
While the perceived probability of a Trump win has increased over recent weeks, we believe there is still ample scope for a sizeable repricing across markets once the election outcome becomes clear. We think a Republican “sweep” would probably lead to …
28th October 2024
Our central forecast is that there won’t be a fiscally induced ‘crisis’ in the Treasury market. But there is clearly a risk of yields rising in response to higher term premia and more restrictive monetary policy than would otherwise be the case, if the US …
25th October 2024
Clients can view all of our financial market forecasts here , and all of our commodity market forecasts here . This Focus assesses the outlook for US energy equities, which have come into the spotlight of late amid swings in oil prices. In short, we …
18th October 2024
All of the historical data supporting this publication can be found on our new Rate Cuts & Asset Returns dashboard. All of the forecasts in this publication can be found on our US Macro or Financial Markets dashboards. This Focus explores the key lessons …
12th September 2024
US corporate credit spreads have all but unwound the rise they saw during the recent market turbulence, and are back at very low levels by past standards. (See Chart 1.) We expect them to remain compressed over the next year or so, as long as the US …
22nd August 2024
Concerns about a US recession have led to a sharp reassessment in financial markets; some of the shifts in the wake of the latest US non-farm payrolls report look overdone (and have to some extent reversed). Given that we still think a “soft landing” is …
9th August 2024
Financial markets have largely taken the dramatic events in the US presidential race over the past month in stride. While the race now appears to be back to a coin toss, the prospect of a second Trump term remains the key uncertainty – a Harris presidency …
1st August 2024
We have revised down our forecasts for government bond spreads in Spain and Portugal, but we continue to think that those in France, as well as in Italy and Belgium, are more likely to rise than fall. The dust has now settled in bond markets after the …
31st July 2024
With unhedged yield gaps still very much in favour of overseas bonds and hedged returns set to improve as overseas central banks slash borrowing costs, Japanese investors won’t respond to higher JGB yields by repatriating capital. And while we expect …
1st July 2024
While the Bank of Japan’s JGB holdings have started to shrink and will continue to do so now that Yield Curve Control is over, we think that the normalisation of the Bank’s balance sheet could take up to a decade. While shrinking central bank demand for …
26th March 2024
We hosted an online briefing to discuss EM financial risks in more detail. Watch the recording here . Our risk indicators are presented as an interactive EM dashboard on our website here . The past few years have sharpened investors’ focus on assessing …
20th March 2024
This Global Markets Focus looks at whether Chinese equities’ recent rally heralds the start of something larger and more sustained. It argues that they could continue to do well over the next year or two, both in absolute terms and relative to many other …
15th March 2024
We think victory for Donald Trump in this year’s US presidential election would lead to higher Treasury yields than if incumbent Joe Biden (or another candidate) won. In our view, another Trump term would also be a headwind for equities – especially …
22nd February 2024
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
This Global Markets Focus explains why we expect the S&P 500 to soar in 2024, in contrast to those who anticipate a much tougher year for the index after a banner 2023. Section 1 sets the scene with a brief overview of the change in the index since the …
17th January 2024
During the past decade, the global economy has transitioned out of an era in which globalisation was the key driver of economic and financial relationships into one shaped by geopolitics. Previously, most governments had believed that closer economic …
16th November 2023
Although Treasury yields have fallen back in recent days, the big picture is that they are still much higher than they were when headline and core inflation peaked more than a year ago in the US. In this Focus , we examine the role of inflation in the …
2nd November 2023
The war between Hamas and Israel – and the potential for escalation to the wider region – has increased the uncertainty around the economic and financial market outlook, but in most scenarios is unlikely to generate a sustained hit to major asset markets. …
26th October 2023
The full report is available to download from the button at the top right to Global Economics, Global Markets, Asset Allocation and The Long Run subscribers, as well as to CE Advance clients. If this is outside of your current subscription and you would …
17th October 2023
Chapter 4: Financial market implications …
Chapter 3: Where will inflation (and nominal rates) settle? …
Chapter 2: How will the savings/investment balance affect r*? …
Chapter 1: Will stronger potential growth boost r*? …
Introduction and framework …
r* and the end of the ultra-low rates era: executive summary …
The government bond sell-off over the past three months raises uncomfortable questions around the risks of financial instability and the outlook for fiscal policy. This note takes stock of what has driven the rise in long-term sovereign bond yields and …
6th October 2023
A “soft landing” for the economy in the US seems increasingly possible, so we look back at previous similar episodes to get an idea of what might be ahead for equities there. Despite the Fed’s aggressive tightening cycle over the past year and a half, it …
7th September 2023
Japan bulls have proposed a range of explanations to justify the outperformance of the TOPIX relative to other equity indices over recent months. While there are some signs that firms are enjoying stronger pricing power, we aren’t convinced that a …
24th July 2023
US banks’ problems may have only just begun, but we doubt a Global Financial Crisis 2.0 is on the cards. As is well known by now, last year’s surge in bond yields, stemming from a dramatic increase in interest rates, caused US commercial banks to rack …
17th March 2023
We forecast the 10-year Treasury yield to decline between now and the end of the year, as inflation eases further and the Fed transitions to monetary loosening. A key risk to this projection, in our view, is the weak outlook for demand for Treasuries, …
26th January 2023
An analysis of the behaviour of the yield of 10-year US Treasuries during the eight major Fed tightening cycles since the 1970s suggests to us that the current sell-off in long-dated US government bonds may have further to run if the Fed hikes rates by a …
14th April 2022
US inflation hit its highest level since the 1990s in October and has now reached a rate that, historically, has coincided with very poor stock market returns. Notwithstanding the uncertainty around the impact of the “Omicron” variant of the coronavirus, …
1st December 2021
We think that the spreads of “peripheral” government bonds in the euro-zone are likely to fall next year to levels not seen since before the region’s sovereign debt crisis and that they will stay low over the next decade. This reflects our view of the …
4th December 2020
As the election campaign draws to a close, this Focus looks at how it has affected equity, bond, and currency markets so far and assesses how different outcomes could shift them after Election Day. This election campaign has already had greater impact on …
29th October 2020
It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to …
29th June 2020
The odds that Joe Biden wins this year’s US presidential election, and that the Democrats also win full control of Congress, have risen recently. While we expect US equities to fare reasonably well over the next few years regardless of the result of the …
22nd June 2020
