Filtered by Subscriptions: Bonds & Equities Use setting Bonds & Equities
We think the Fed and most other developed markets (DM) central banks will be able to ease monetary policy this year and next more than investors currently anticipate. DM bond yields will end 2024 below their current levels, putting downward pressure on …
29th April 2024
The NASDAQ 100 has shrugged off this week’s surge in real US Treasury yields amid a mixed bag of earnings reports from some of the ‘Magnificent 7’. (See Chart 1.) This suggests to us that the earlier pull-back in the index wasn’t a harbinger of a far …
26th April 2024
We think the recent recovery in the share prices of some of the ‘Magnificent 7’ is a sign that the earlier pull-back in their collective performance wasn’t a harbinger of a far bigger correction in the NASDAQ 100. On the contrary, we suspect that index …
The US dollar would have to appreciate a lot further before having significant effects on the global economy and financial system. A key risk to watch for is the widening policy divergence between the US and Asia leading to a major depreciation in the …
25th April 2024
Hikes are back on the agenda at some central banks and core PCE data for Q1 added to the hawkish mood in US markets. But we don’t think the Fed will feel the need to start hiking again. Indeed, given the path of underlying inflation, we continue to think …
Even if the US dollar stays strong against most currencies this year, we think that much of the broad-based weakness in EM (emerging market) FX has run its course. While some EM central banks may now slow their easing cycles, major shifts in policy are …
24th April 2024
We expect corporate bond yields in the UK and euro-zone to fall as rate cuts in those economies push down risk-free rates and strong risk sentiment narrows spreads further. In contrast to the weaker-than-expected PMI data out of the US today, PMIs for …
23rd April 2024
Stock markets are having a tough start to the quarter, but we think that they will rebound, notably in the US, thanks to renewed enthusiasm about artificial intelligence (AI). While they have bounced back a bit today, equities in the US and elsewhere have …
22nd April 2024
All nine constituents of the S&P 500 diversified banks index have now released their earnings reports for Q1. While the performance of their shares has typically been underwhelming of late, in some cases that can be only partly attributed to the lukewarm …
19th April 2024
Despite the ongoing surge in long-term government bond yields, the US yield curve remains inverted. As such, it is worth revisiting what the implications are for financial markets, and how this episode differs (or not) from previous curve inversions. As …
18th April 2024
The risk premia on Turkish assets are now low relative to the past decade or so. We think that will remain the case over the coming quarters, given the positive global risk-on attitude and the ongoing shift to traditional macroeconomic policy. Even so, …
We forecast that bond yields will fall back in most developed markets (DMs) over the next year or so, as central banks generally embark on bigger easing cycles than investors currently expect. But given our view that the Federal Reserve faces more hurdles …
Today’s UK CPI release has not made a sustained impact on investors’ expectations over the path of Bank Rate, and the market pricing implies that investors are still discounting fewer cuts from the Bank of England (BoE) than we are. This is why we expect …
17th April 2024
The correlation between changes in bond yields and in equities has rarely been so negative, and we suspect this will continue as yields fall back and equities rebound. When the Federal Reserve turned to monetary policy tightening in 2022, Treasury yields …
16th April 2024
Financial markets have, so far, taken the latest escalation in the Middle East over the weekend largely in stride. Our sense remains that, absent an even larger conflagration that disrupts energy supply chains, market participants will continue to focus …
15th April 2024
Inflationary pressures both domestically and in the US may keep government bond yields in emerging markets (EM) high for a while yet. But we think they will eventually fall later in the year. 10-year EM government bond yields have followed US Treasury …
12th April 2024
Today’s ECB policy announcement and press conference support our forecast for a June rate cut. Given that we expect more rate cuts than the money market discounts, we think that Bund yields will fall back towards 2.25% by the end of the year. Today’s …
11th April 2024
Despite yet another hotter-than-expected US CPI release, there are few signs in bond markets that long-term inflation expectations are de-anchoring. That supports our base case that US Treasury yields will fall back later this year, even if it also …
Today’s slump in S&P 500, following the release of a hotter-than-expected US CPI report for March, underscores the US stock market’s vulnerability to disappointing news on inflation. (See Chart 1.) Nonetheless, even though the pull-back was accompanied by …
10th April 2024
We think the price of gold will have eased back from current record highs by end-2024, but falling US Treasury yields and some softness in the US dollar will keep the price elevated. We had always expected the price of gold to fare well this year given …
9th April 2024
We expect Japanese equities to do quite well this year, as hype around artificial intelligence proves a more powerful catalyst than the headwind we anticipate from a stronger yen. Despite bouncing back a bit today, Japanese equities have fared poorly …
8th April 2024
Continued strength in the US labour market may keep US Treasury yields elevated and the greenback strong in the short term, but we think the upside for both is limited from here. And the backdrop for US equities looks favourable to us, even if the Fed …
5th April 2024
We expect equities to outperform most other assets as a bubble fuelled by AI-enthusiasm continues to inflate, supported by a backdrop of resilient economic growth and monetary easing cycles. In particular, we expect US equities to continue to lead the …
4th April 2024
While a rising tide of optimism has lifted most boats in the US stock market so far this year , real estate is the notable exception . (See Chart 1.) That may change if, as we anticipate, the 10-year Treasury yield drops back a bit further from a roughly …
We think China’s equities could fare better than those in India in the near term. For a while now India’s equity market has reportedly been a popular target for investors seeking emerging market exposure with less of the risks that come with investing in …
3rd April 2024
The sharp rise in Treasury yields this week has probably contributed to the sell-off in US equities, but it isn’t the only factor. And even if Treasury yields remain high, we doubt that would prevent the US stock market from rising further this year. The …
2nd April 2024
Equities have enjoyed another strong quarter and, while a lot of good news is priced in, we think they can extend their winning streak. Sovereign bonds have, by contrast, struggled over Q1; but we think they have scope to rally, and rate cuts by major …
28th March 2024
We think the bulk of the fall in corporate credit spreads is now in the rearview mirror, especially in the US. After falling markedly since November last year , the option-adjusted spreads (OAS) of the US ICE BofA Corporate Bond Indices have stabilised …
27th March 2024
We expect the spreads between the yield of the 10-year German bund and its ‘riskier’ counterparts in other euro-zone economies to narrow only a little further this year. If anything, we think that the fiscal outlooks in France and Italy mean that the …
While w e think that equities in the UK will continue to rise over the next couple of years, we suspect they will keep underperforming those in the US, and we see little scope for valuations to help them relative to other developed market equities. UK …
26th March 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 …
Push-back from the authorities in China and Japan has stabilised their currencies against the US dollar today, and our base case remains that policymakers will prevent destabilising depreciations in the renminbi and yen. Nonetheless, it is worth thinking …
25th March 2024
While the current backdrop may keep the renminbi on the back foot against the dollar in the short term, we doubt that these headwinds will push the currency meaningfully lower this year. The renminbi has finally weakened against the dollar after more than …
22nd March 2024
This week’s flurry of central bank meeting points to growing confidence among policymakers in most major economies that inflation is on track back to target. That supports our view that long-term government bond yields will fall back a bit further this …
21st March 2024
The valuations of “risky” assets have kept rising so far this year, even as “safe” asset yields have rebounded. While risky asset valuations are quite high by past standards, we doubt this will prevent equities from rising a lot further this year and …
Our view that Treasury yields will fall back a bit and that the US dollar will generally weaken by the end of the year rests on the assumption that the Fed will deliver more rate cuts than currently discounted in money markets. So these forecasts are …
20th March 2024
We think Emerging Market (EM) dollar bond yields will fall in general by the end of this year, thanks both to lower US Treasury yields and, in some cases, narrower spreads. But the sovereign dollar bonds of some EM economies, such as South Africa and …
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 …
Credit spreads aren’t bound to fall further if a bubble continues to inflate in the stock market, judging by what happened in the US in the second half of the 1990s. Admittedly, the option-adjusted spreads (OAS) over underlying Treasuries of ICE BofA’s …
19th March 2024
The Bank of Japan ended its eight-year run of negative interest rates today . We think there are several implications for Japanese – and global – financial markets. Today’s fall in the yields of long-dated JGBs suggests that investors took the hike in …
Given our view that a stock market bubble will inflate in the US , we wouldn’t be surprised to see the equity risk premium (ERP) shrinking further in the near term. This might even go as far as the premium vanishing, as happened for instance at the peak …
18th March 2024
We think that, despite ongoing PBOC intervention to prop it up, the valuation of the renminbi looks very weak on a range of fundamental metrics. As such, we wouldn’t be surprised if it rose over time, especially if – as we expect – yield differentials …
15th March 2024
The past few months have seen risk premia compress across most financial markets, and stress across core financial markets appears lower than at any point since mid-2021. While some lingering risks remain, we think that an emerging bubble in equity …
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 …
It is no surprise that the confidence of US consumers is closely aligned to the health of the stock market these days. After all, the share of households that own equities is the highest in at least three decades. With that in mind, the recent surge in …
14th March 2024
Most major equity markets and currencies in Latin America have lagged those in other regions since the start of the year, and we expect their underperformance to continue for some time. As equity markets in the US are making new all-time highs, there are …
13th March 2024
Stronger-than-expected US core CPI data did not trigger as big a reassessment in rate expectations as they did last month in financial markets, and we still forecast the Fed to start easing policy around June. Given our view that it will eventually …
12th March 2024
The surge of the Japanese yen ahead of next week’s BoJ policy announcement could still prove yet another false dawn. But with the monetary policy divergence that has driven the yen down over the past couple of years set to start reversing before long and …
11th March 2024
Today’s favourable reaction in financial markets to February’s US Employment Report probably reflects the inflation-friendly news of softer-than-expected growth in average hourly earnings amid mixed signals from the establishment and household surveys …
8th March 2024
Given our view about monetary policy, we expect government bond yields in some developed markets such as the UK to fall markedly this year. In some other places, like the euro-zone, we doubt central banks will have much impact on yields. And we see scope …
7th March 2024
