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So far this year, the US dollar has moved in tandem with the relative performance of US equities. While that may continue over short time horizons, we doubt the rally in US equities we anticipate over the next couple of years will be a significant …
21st February 2024
Unlike most bubbles, this one hasn’t been accompanied, at least so far, by obvious signs of high and rising leverage. On the other hand, the share of funds invested in ‘passive’ products is now much higher than in prior bubbles. This Update considers how …
20th February 2024
We expect China’s bonds, currency and equities to rally over the rest of this year. After declining to cut its benchmark MLF rate on the weekend, the PBOC restarted its easing today with a larger-than-expected reduction in its 5-year Loan Prime Rate. (See …
We think that corporate credit spreads will narrow a bit more in the US and Europe. Along with lower “risk-free” rates, this will in our view contribute to pushing yields down this year. Credit spreads in the US and Europe have generally fallen since 19 …
19th February 2024
We think Japan’s stock market will take a turn for the worse before long, weighed by what we expect will be a rebound in the yen. And while that nonetheless could mean decent returns in US dollar terms, we doubt Japan’s equities will keep up with those in …
16th February 2024
We expect India’s stocks, bonds, and currency to rally over the remainder of this year. It’s been a strong start to the year for India’s financial markets. The MSCI India Index of the country’s equities has been the strongest performer of MSCI’s large …
Weaker economic data from the US have bolstered our view that the Federal Reserve will be able to cut rates by more than investors currently expect. As a result, we continue to think that Treasury yields will generally fall by the end of the year. …
15th February 2024
We think that UK inflation will continue to fall faster and further than many seem to be expecting, paving the way for the Bank of England (BoE) to cut interest rates by more than is now discounted in markets. That helps to inform our view that today's …
14th February 2024
Today’s hotter-than-expected US inflation data makes for another bump in the road for US bond and equity markets. But we think a full-scale return to the bad old days of the 2021-23 inflation scare is unlikely, and that the US equity market will continue …
13th February 2024
The ways things are going, our upbeat forecast for the S&P 500 of 5,500 at the end of this year may be realised in a matter of months . We doubt the rally would end there, though. Admittedly, we might be inclined in that event to pencil in an earlier end …
12th February 2024
“High-carry” emerging market (EM) currencies have not been immune to broad-based dollar strength so far this year, and we think they have further to fall. Although investors have pared back expectations for rate cuts by major central banks (notably the …
9th February 2024
US corporate credit spreads have continued to shrink even as bankruptcies have soared but, while they are now fairly narrow, we think there is still some scope for them to tighten further over the remainder of this year. It hasn’t been a great start to …
8th February 2024
We expect government bond yields in emerging market (EM) economies to fall over the remainder of the year, helped by a broadening easing cycle and falling Treasury yields. While the big question around monetary policy in developed market (DM) economies is …
Policy support for Chinese equities may facilitate a near-term rebound, but investors probably need to be convinced that the government's attitude towards the private sector has shifted if there is to be a more sustainable rally. Chinese equities have …
7th February 2024
While the overall incidence of sovereign debt distress in the emerging world has fallen back since last year, sovereign debt distress in frontier markets hasn’t. And, if anything, things have taken a turn for the worse in recent weeks in some of the more …
Although last week’s renewed underperformance of US regional banks and equity office REITs sparked fears of another mini banking crisis, a fairly steady decline in the option-adjusted spreads (OAS) of private label commercial mortgage backed securities …
6th February 2024
Oil prices have had only limited impact on US Treasury yields recently, and we suspect that this will remain the case in the next couple of years. So far this month, oil prices have fallen back quite sharply. At around $72 per barrel (pb) at the time of …
5th February 2024
The US Employment Report , released today, showed that non-farm payrolls for January came in at a whooping 353,000 – even more than the upwardly revised 333,000 number for December and almost double analysts’ median expectation. Immediately after the …
2nd February 2024
Despite the Bank of England (BoE) following the Fed in pushing back against imminent rate cuts, Gilt and Treasury yields are on track to post big falls today. That partly reflects renewed concerns over US regional banks, and offers a reminder that for …
1st February 2024
Ahead of the first Fed meeting of 2024, we think there are two points for investors to note about how the central bank might affect markets this year. First, while the Fed may be cautious today, we see scope for Treasury yields to drop a bit more. Despite …
31st January 2024
The US Treasury’s latest borrowing estimates pushed long-dated yields down, and the Quarterly Refunding Announcement (QRA) on Wednesday may add to positive sentiment. But we think that a poor fiscal outlook in the US and more price-sensitive buyers will …
30th January 2024
Our latest Global Markets Chart Pack is embedded below. We think that the Fed and several other DM central banks will deliver more policy rate cuts this year and next than investors currently anticipate. As a result, we forecast that Treasury yields will …
We think the best days for US investment-grade (IG) corporate bonds will soon be over. One reason is that credit spreads are now already very low. The option-adjusted spread (OAS) of ICE BofA’s index of US IG corporate bonds, for example, dipped below …
29th January 2024
We think the recent falls in long-dated government bond yields across developed market (DM) economies will extend over the remainder of this year, as central banks generally cut by more than investors currently expect. We project most of those yields to …
Similar to the late 1990s, we think the economic backdrop in the US won’t stand in the way of a bubble inflating in the S&P 500. But unlike then, we doubt it will help the dollar much. US equities have rallied since GDP data revealed yesterday that growth …
26th January 2024
We think the “tech” sectors of China’s stock market are the best prospects to lead a continued rebound in it, even if we doubt they’ll fare as well as many of their global tech peers over the next couple of years. China’s benchmark equity indices have …
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
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 …
19th January 2024
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
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
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 …
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
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
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
Although bonds and equities have started the year on the back foot, which may continue in the near term, we think they’ll fare better over the year as a whole. We project especially large gains for equities. Any renewed hopes for a “soft landing” prompted …
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 …
5th 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 …
4th January 2024
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
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
