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Comparing Robert Shiller’s well-known cyclically-adjusted price/earnings ratio(CAPE) to its long-run average suggests the US stock market is currently significantly overvalued. However, we don’t think the market is nearly as expensive as this measure …
17th September 2015
This report is only available as a PDF. Click to download. … Are the markets braced for tighter US monetary policy? …
Earlier this week the Malaysian authorities joined their Chinese counterparts in intervening in the equity market, but there is little evidence that such policies are effective. Global pressures will continue to be the major driving force of EM stock …
With the debate about the valuation of the US stock market continuing to rage, one factor which is often overlooked is the importance of choosing the correct long-term average with which to compare its current level. When it comes to Shiller’s well-known …
16th September 2015
This report is only available as a PDF. Click to download. … Fed tightening and the relative prospects for DM equities …
We still think there is a good chance that US interest rates will be raised tomorrow. But whether “liftoff” is this week or later, emerging market assets and currencies are unlikely to go into meltdown. … What to expect from EM markets when the Fed …
By comparing the current level of Robert Shiller’s well-known cyclically-adjusted price/earnings ratio (CAPE) with its long-run average, the equity bears assert that the US stock market is vastly overvalued. However, we think the market is nowhere near as …
15th September 2015
This report is only available as a PDF. Click to download. … Don’t believe the CAPE …
Provided the panic over China subsides, we expect the yen to slide further and the Nikkei to surge as the Bank of Japan steps up the pace of its asset purchases, perhaps as soon as next month. … Japanese equities to outperform US as monetary policies …
This report is only available as a PDF. Click to download. … First Fed rate hike need not be a seismic shock …
14th September 2015
This report is only available as a PDF. Click to download. … How will markets react to Fed “lift-off”? …
11th September 2015
Equity markets in the emerging world have been the biggest casualty of the uncertainty about when the Fed will finally push the button on rate hikes. For our part, we still expect “lift-off” later this month. But past form shows that EM markets have often …
10th September 2015
This report is only available as a PDF. Click to download. … EM foreign currency bond yields likely to rise, but not balloon …
We do not think that the downgrade of the Brazilian government’s foreign currency debt to “junk” status marks the beginning of a systemic emerging market (EM) sovereign debt crisis. But we do expect bond yields to rise in the months ahead as credit …
We don’t see the possibility of China running down its foreign exchange reserves in attempts to support the renminbi as a significant risk to US Treasuries. The links between Chinese demand for Treasuries and their yields are not particularly strong and, …
9th September 2015
This report is only available as a PDF. Click to download. … Which EM currencies will suffer in the event of more capital flight? …
Our Currency Vulnerability Index (Curvi) suggests that the Brazilian real, Turkish lira, South African rand and Colombian peso remain the most exposed emerging market (EM) currencies to snap sell-offs. By contrast, the Indian rupee, Czech koruna and …
Four of the worst-performing G-10 currencies since mid-2014 have been those of countries that export large amounts of commodities, namely the dollars of Canada, Australia and New Zealand, and the Norwegian krone. Our view is that the Australian and New …
8th September 2015
This report is only available as a PDF. Click to download. … Not all commodity currencies are the same …
This report is only available as a PDF. Click to download. … What next for sterling? …
7th September 2015
This report is only available as a PDF. Click to download. … What to make of the latest US Employment Report? …
4th September 2015
We think the widespread fall in the dollar against other major currencies in the wake of the “devaluation” of the Chinese renminbi was primarily a response to a shift in expectations for US monetary policy. Nonetheless, the fall in the dollar has since …
This report is only available as a PDF. Click to download. … Taking stock of the sell-off in EM equities …
3rd September 2015
This report is only available as a PDF. Click to download. … What next for the dollar? …
2nd September 2015
We think emerging market (EM) dollar-denominated corporate bonds will perform poorly over the coming years, but we do not agree with suggestions that they will be the source of an imminent EM crisis. One or two firms may run into trouble, particularly in …
This report is only available as a PDF. Click to download. … Monetary policy has not become impotent …
1st September 2015
This report is only available as a PDF. Click to download. … Industrial commodities ripe for recovery …
28th August 2015
To some, the recent sell-off in global financial markets was merely the beginning of what will soon become a much bigger downturn, because the valuations of many assets remain excessively high. However, our view is that valuations are generally not very …
We doubt the recent plunge in global equity prices will have a major bearing on the FOMC’s decision next month. Nonetheless, it may provide an excuse for the Committee to hold fire. … Will stock market upheaval deter the Fed from …
27th August 2015
This report is only available as a PDF. Click to download. … How much will the market turmoil influence the Fed’s thinking? …
Emerging Market (EM) equity valuations are no longer stretched either in an absolute or relative sense following the summer sell-off. Once the recent volatility in global markets settles down, we think that these valuations could rise, leading to some …
26th August 2015
This report is only available as a PDF. Click to download. … Drivers of the US stock market are likely to change Capital …
This report is only available as a PDF. Click to download. … More monetary easing in China restores some calm to the markets …
25th August 2015
A slump of around 10% in the S&P 500 since 10th August is unlikely to mark the start of a bear market, which typically only occur in, and around, recessions. We are sticking with our forecast that the index will end 2015 at 2,100 (compared to a close of …
We have reviewed our key forecasts for developed markets in light of the renewed slump in China’s stock market and related panic. Despite the turmoil, for now we are retaining our existing forecasts for currencies and equities, while adjusting those for …
24th August 2015
This report is only available as a PDF. Click to download. … What to make of the panic in financial markets? …
Today has obviously been an awful day in the markets, particularly for equities and industrial commodities. But stepping back from the headlines, six more positive points are worth stressing. … Six glimmers of …
An 8.5% fall in the Shanghai Composite Index has sent shockwaves through EM equity markets, but we continue to think that there are few parallels between what is happening now and previous crises. While the differences do not preclude further falls in …
The recent devaluation of China’s renminbi and the slump in commodity prices were the two key factors behind Vietnam’s decision last week to widen the dong trading band with the dollar and the subsequent move by the Kazakh central bank to scrap its …
This report is only available as a PDF. Click to download. … Has the euro really become a “safe haven”? …
21st August 2015
The Norwegian krone has been the worst-performing G-10 currency since the middle of last year – it has lost more than a quarter of its value against the US dollar. Still, given the prospects for the price of oil, as well as monetary policy in Norway and …
20th August 2015
This report is only available as a PDF. Click to download. … Slump in EM equities seems unlikely to last much longer …
Local currency government bonds have been a port in the emerging market (EM) storm during the past year, as investors have revised down their expectations for policy rates. While they are now generally in agreement with our long-standing dovish views on …
This report is only available as a PDF. Click to download. … Renewed weakness in the yen should boost equities in Japan …
19th August 2015
Although the yen has stayed weak against the US dollar, it has appreciated in trade-weighted terms in response to a slump in some emerging Asian currencies. Still, the yen’s real effective exchange rate remains very low and we think it is likely to fall …
This report is only available as a PDF. Click to download. … Re-run of the Asian Financial Crisis looks unlikely …
18th August 2015
The recent depreciation of the Indonesian rupiah and Malaysian ringgit against the dollar has left both currencies at levels not seen since 1998, but suggestions that this signals a re-run of the Asian Financial Crisis are wide of the mark. If both …
This report is only available as a PDF. Click to download. … Why are US corporate credit spreads creeping up? …
17th August 2015
This report is only available as a PDF. Click to download. … What next for the US stock market? …
14th August 2015
Weak productivity growth and rising wage inflation are likely to put upward pressure on unit labour costs in the US over the coming year, squeeze profit margins and cap the upside for the stock market. … Rising unit labour costs a danger to the US stock …
