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UK equities underperformed other major developed markets significantly in 2013 and have fared no better than their American and European counterparts since the start of the year. But we think this underperformance is likely to be reversed over the coming …
18th February 2014
The earnings multiple of equities in Japan has fallen sharply since the start of the year. In contrast, those of the US have held broadly steady. The upshot is that the 12-month trailing price/earnings ratio for equities in Japan is now some 5 points …
This report is only available as a PDF. Click to download. … Too early to conclude that "Abenomics" is failing …
This report is only available as a PDF. Click to download. … Weather can impact commodity prices in odd ways …
17th February 2014
The implementation of growth-enhancing and risk-reducing economic reforms provides long-run benefits to investors in emerging markets. But as the recent turbulence attests, other factors play a more important role in determining asset prices in the short …
14th February 2014
This report is only available as a PDF. Click to download. … Will investors fall back in love with gold? …
One argument made by US equity bulls is that Shiller’s cyclically-adjusted price/earnings ratio (CAPE) exaggerates the extent to which the stock market is overvalued because it does not account for a structural shift in firms’ dividend policy. This …
13th February 2014
This report is only available as a PDF. Click to download. … UK monetary policy likely to remain loose for some time yet …
This report is only available as a PDF. Click to download. … Bank of England set to alter its forward guidance …
12th February 2014
Like most other emerging market assets, dollar-denominated bonds have performed poorly over the past month. But they have at least fared better than they did during last summer’s sell-off. Spreads on both government and corporate securities have generally …
11th February 2014
The Bank of England looks set to overhaul its forward guidance as part of tomorrow’s Inflation Report. But we doubt a revamped version will have a greater influence on the pricing of Gilts than the original, even if the absence of offsetting factors make …
This report is only available as a PDF. Click to download. … Yellen likely to play down weak data and EM turmoil …
This report is only available as a PDF. Click to download. … Disappointing payrolls unlikely to sway the Fed …
10th February 2014
This report is only available as a PDF. Click to download. … US non-farm payrolls likely to rebound after weather distortion …
7th February 2014
This report is only available as a PDF. Click to download. … ECB likely to loosen monetary policy further soon …
6th February 2014
This report is only available as a PDF. Click to download. … Equities are likely to recover over the course of 2014 …
5th February 2014
The recent sell-off both in emerging and developed equities has a wide range of drivers, including worries about Fed tapering and the perceived risks of a “hard landing” in China. Nonetheless, our sense is that the worst of the markets fears are overdone …
4th February 2014
One of the best-performing assets since the start of the year has been long-dated US Treasuries, with the 10-year yield falling back by some 40bp or so in January, to around 2.6%. This was largely driven by investors’ renewed demand for safe-haven assets …
This report is only available as a PDF. Click to download. … Fed tapering not the main driver of EM sell-off …
Many equity investors will be happy to see the back of January, but several lessons are worth underlining. In short, the gradual scaling back of the Fed’s asset purchases alone still seems unlikely to result in a major sell-off in the Treasury market or a …
3rd February 2014
This report is only available as a PDF. Click to download. … ECB meeting could overshadow US employment data …
This report is only available as a PDF. Click to download. … How worried should we be about China? …
31st January 2014
Almost all emerging market currencies have depreciated further against the dollar over the past month. Looking at the real effective exchange rates of emerging markets, 20 of the 24 currencies we cover now look “undervalued” relative to a 10-year trend. …
30th January 2014
This report is only available as a PDF. Click to download. … Many EM central banks still likely to shrug off currency weakness …
There have recently been few relationships which are more reliable than the tight correlation between the level of the Nikkei and the yen/dollar exchange rate. We are wary of simply extrapolating a forecast of renewed declines in the Japanese currency to …
29th January 2014
This report is only available as a PDF. Click to download. … Fed likely to continue with taper despite market volatility …
One reason for the current nervousness in emerging markets (EMs) is of course the Fed's decision to begin tapering its asset purchases. However, suggestions that EM equities will inevitably struggle in an environment of rising US government bond yields …
28th January 2014
This report is only available as a PDF. Click to download. … Fears of an emerging market rout appear overdone …
Although some currencies have fallen sharply this month, it still does not seem right to talk about a new financial crisis sweeping across all emerging markets (EMs). What’s more, the economic slowdown in China, which is also unsettling many investors, …
27th January 2014
The sell-off in emerging market (EM) assets following the Fed’s decision to taper its asset purchases in December has prompted comparisons with last summer’s turmoil. But while the latest data from EPFR Global suggest that EM assets did see significant …
This report is only available as a PDF. Click to download. … Is a new crisis set to sweep across emerging markets? …
As the Fed gradually scales back its unconventional monetary stimulus, we expect the dollar to rise against the other major developed currencies. We also expect government bond yields to increase. However, the US central bank is set to tread very …
24th January 2014
This report is only available as a PDF. Click to download. … Local rate speculation impacting currencies more than bond yields …
This report is only available as a PDF. Click to download. … ECB likely to announce further easing before the Bank of Japan …
23rd January 2014
This report is only available as a PDF. Click to download. … IMF plays catch-up …
22nd January 2014
This report is only available as a PDF. Click to download. … Chinese slowdown set to continue into 2014 …
21st January 2014
This report is only available as a PDF. Click to download. … UK unemployment data unlikely to undermine Gilts …
20th January 2014
This report is only available as a PDF. Click to download. … UK retailers likely to have had a poor Christmas on average …
17th January 2014
Dollar-denominated emerging market (EM) government bonds fared badly in 2013. The JP Morgan EMBI+ returned around minus 8%, which was the second worst annual performance since 1998. While we do not expect this year to be as disappointing, we doubt it will …
16th January 2014
This report is only available as a PDF. Click to download. … Little scope for US Treasuries and UK Gilts to rally further …
This report is only available as a PDF. Click to download. … US pipeline price pressures likely to remain subdued …
15th January 2014
Government bond yields have continued to fall in much of the euro-zone in response to improving economic conditions. Spreads over German Bunds have fallen to multi-year lows in many nations. But investors’ optimism may have swung too far given that the …
14th January 2014
We continue to expect the Fed to taper its asset purchases only gradually and to keep US interest rates on hold near zero until mid-2015. Nonetheless, thereafter we expect the Fed to return rates to more normal levels more quickly than the markets …
This report is only available as a PDF. Click to download. … UK inflation still on course to fall below 2% target …
One explanation for the relatively poor performance of emerging market (EM) equities has been the economic slowdown in many countries. But while supply-side structural reforms are needed to reinvigorate growth, their implementation would not necessarily …
13th January 2014
This report is only available as a PDF. Click to download. … Fed to continue tapering despite weak US payrolls data …
This report is only available as a PDF. Click to download. … ECB’s Draghi lays the groundwork for more policy action …
10th January 2014
An extended period of ultra-loose monetary policy and additional asset purchases by the Bank of Japan should have some (mostly) positive spill-over effects into world markets this year and next. However, we think further monetary easing will mainly …
9th January 2014
This report is only available as a PDF. Click to download. … Pressure grows on the ECB to take further action …
As the Fed gradually begins to scale back its monetary stimulus this year, we expect the dollar to rise and government bond yields to continue to drift higher. We also think investors’ appetite for “risky” assets is likely to wane. In general, though, we …
8th January 2014
