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We doubt that ECB policy will have much impact on German bond yields this year and next – if anything, risks are skewed to the upside. But the outlook may be a bit brighter for Italian bonds, and we expect the Italian-German spread to narrow. The yield of …
7th March 2024
Today’s UK budget announcement contained no major surprises, leaving our forecast for the 10-year Gilt yield to fall further this year and sterling to struggle against other major currencies intact. Our UK Economics service is the place to look for the …
6th March 2024
We think there are three key points for investors to note from today’s announcements at the National People’s Congress annual “Two Sessions”, where the country’s authorities, among other things, have announced fresh growth and fiscal targets. First, …
5th March 2024
We don’t think Fed rate cuts are a necessary condition for the stock market bubble to inflate further. After all, most measures of equity risk premia have scope to fall as hype around AI grows. A central theme of 2024 so far has been the paring back of …
4th March 2024
Today’s rise in the 2-year Japanese government bond yield to its new highest level since 2011 raises the question of whether this is the start of a far bigger sell-off in the bond market, or just another false dawn that will reinforce the reputation of …
1st March 2024
January US PCE inflation is in line with our view that the Fed’s preferred measure of inflation will return to target by mid-year, allowing policymakers to cut rates further than investors seem to expect. So we still think that the 10-year Treasury yield …
29th February 2024
We think the Fed and most other DM central banks will deliver a bit more policy rate cuts this year and next than investors currently anticipate. As a result, we forecast that Treasury yields will end 2024 slightly below their current levels, putting …
28th February 2024
The RBNZ’s decision to keep its policy rate on hold today illustrates how the bar for further rate hikes has become increasingly high for most central banks, even in the face of upside surprises to inflation. With money markets in New Zealand, and most …
We are revising up our end-2024 and end-2025 forecasts for the 10-year Treasury yield by 25bp, to 4%. This reflects recent changes to our projections for the federal funds rate . Nonetheless, our new forecast for the 10-year yield still implies a small …
While enthusiasm over AI probably explains much of the “Magnificent Seven’s” outperformance in the US, the outperformance of the largest stocks in other markets is indicative of a broader shift in investors’ preferences towards larger stocks. That helps …
27th February 2024
Equities in Emerging Asia have outperformed those elsewhere in recent weeks, and we think that they’ll keep doing well during the rest of the year. Chart 1 shows that, while EM equities had a difficult start to the year (see blue bars, which show …
26th February 2024
While we think that American exceptionalism in stock markets will continue this year as a bubble fuelled by enthusiasm around AI keeps inflating, we expect equities in other developed markets (DM) to fare quite well. Nvidia and the other “Magnificent 7 ” …
23rd February 2024
The recent back-up in long-term Treasury yields, reflecting concerns that inflation isn’t coming down fast enough to prompt the Fed to cut rates in the near future, raises the question of how much worse things might get for bonds if Donald Trump is …
22nd February 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 …
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
