Financial markets in Central Europe have been hit hard by the contagion from the war in Ukraine, but spill-overs to other EMs have been limited so far. If the war were to result in a sustained period of risk aversion and capital outflows, this could cause …
10th March 2022
While Russia’s financial markets have unravelled since the country’s invasion of Ukraine, global markets have so far held up relatively well. But the mood seems to have turned a bit in recent days, and there are now some early signs of financial stress …
3rd March 2022
The latest trade data suggest that the Omicron wave caused limited disruption at the turn of the year. And, for now, it looks like the impact of the Russia-Ukraine war on world trade will be small in aggregate. But the hit would become much larger if …
1st March 2022
Higher government bond yields and falls in property yields across all sectors contributed to a deterioration in European property valuations in Q4. (See Chart 1.) While most industrial markets now look overvalued, for now we think that this is justified …
There was little change to property valuations in Q4, with two major exceptions. Those were the industrial sector, which saw another decline in its valuation score, and a handful of Southern apartment markets, which dropped into the overvalued range. Both …
25th February 2022
Large Omicron waves have caused activity to weaken in many EMs in Q1, but the good news is that mobility appears to bounce back quickly once outbreaks subside. As a result, the economic hit is likely to be small and short-lived. Instead, high inflation …
22nd February 2022
Property valuations, compared to bonds and equities, deteriorated for a fourth consecutive quarter in Q4. The spread between the asset classes narrowed as the magnitude of the fall in all-property yields outweighed marginal downward moves in gilt and …
9th February 2022
Emerging market (EM) equities’ relatively low valuations may continue to hold them in better stead than equities in the US, but we think they will do less well compared to other developed market (DM) equities. One striking feature of January’s falls in …
1st February 2022
The latest activity figures suggest that the EM recovery held up reasonably well at the end of last year, although China’s economy was struggling for momentum. While Omicron virus waves are likely to dampen activity this quarter, the impact will probably …
27th January 2022
After gradually trending lower for much of last year, November marked the second consecutive month of strong growth in world trade, which reached a new record high. This adds to evidence that some product shortages began to ease towards the end of 2021. …
26th January 2022
Our China Activity Proxy (CAP) suggests that China’s economy was still struggling to regain momentum at the end of last year amid troubles in the property sector and recurrent COVID outbreaks which continue to depress service sector activity. We think …
24th January 2022
China’s economy started 2021 above its pre-pandemic path of output, thanks to stimulus and surging global export demand. Our China Activity Proxy (CAP) suggests that the economy is ending the year well below the pre-pandemic path as a boom in construction …
20th December 2021
The recent rally in the US dollar has been driven by strong economic fundamentals in the US relative to other major economies and a favourable shift in yield differentials, leaving the greenback only a bit above our estimates of “fair” value. We expect …
17th December 2021
The recovery from the crisis over the course of this year has been uneven, with strong retail spending and industrial output setting the stage for a sharp rebound in the likes of Chile, Colombia and Poland, while recoveries in South Africa and Brazil have …
15th December 2021
The dramatic slump in the Turkish lira over the past month once again leaves the currency firmly in crisis territory. One crumb of comfort is that Turkish banks are in a better position to cope with large falls in the lira than they were during the 2018 …
7th December 2021
If the new Omicron variant leads to tighter containment measures across the world, that would probably prop up demand for pandemic-related goods to the benefit of Asian exporters. Meanwhile, oil producers are likely to see external positions deteriorate …
30th November 2021
Higher alternative asset yields and falls in office and industrial yields contributed to a further deterioration in property valuations in Q3. (See Chart 1.) The decline in government bond yields since then, which has been reinforced by concerns about the …
29th November 2021
World trade has continued to edge down from its high peak in March, as supply shortages have meant that Asian exporters remain unable to keep up with strong demand from consumers in advanced economies. Even when demand does eventually abate, large …
25th November 2021
Download the PDF for the full report Our monthly Long Run Returns Monitor provides our updated long-term projected returns for major asset classes, as well as a summary of the macroeconomic forecasts which underpin them. All projections in this …
Persistent supply shortages, fading reopening boosts and tighter financial conditions all pose headwinds to recoveries in Emerging Europe and Latin America over the coming quarters, while cooling construction activity looks set to weigh on growth in …
Rising equity earnings yields and government bond yields squeezed property valuations in Q3. While pricing still looks reasonable at the all-property level, the industrial sector is starting to look overvalued on a historical basis, with yield falls …
24th November 2021
Our China Activity Proxy (CAP) shows that growth ticked up last month as energy shortages eased and the service sector continued to recover from virus disruptions over the summer. But the rebound remains lacklustre, with output still well below June’s …
Compared to bonds and equities, property valuations deteriorated further in Q3. This was due to a combination of a fall in property yields on the one side and a rise in both bond and equity yields on the other. Although we expect a less dramatic fall in …
12th November 2021
The big increases in EM commodity producers’ trade balances this year are likely to go into reverse if, as we expect, the prices of energy and metals fall back. At the same time, the manufacturing-based EMs whose exports have been held back recently by …
29th October 2021
The evidence keeps mounting that world trade is unable to rise any further from its elevated level. And industrial supply and global logistics are likely to continue failing to keep up with demand in the coming months, even as the global recovery slows. …
28th October 2021
After what appears to have been a strong Q3, we expect recoveries in many EMs to enter a slower phase as re-opening boosts fade and goods shortages bite. Q3 GDP data due over the coming weeks should show strong quarter-on-quarter growth in Emerging …
26th October 2021
Our China Activity Proxy (CAP) shows that output rebounded last month as the disruption to the service sector from virus outbreaks eased. But this wasn’t enough to prevent a sharp contraction last quarter. And even if services activity holds up better …
25th October 2021
22nd October 2021
We don’t think the low valuations of emerging market (EM) equity indices relative to those of developed markets (DMs) is reason to expect EM equities to outperform over the next couple of years. Equity market valuations, as measured by price/forward …
18th October 2021
We forecast that the valuation of the US stock market will deflate a bit further over the next couple of years, though we are not expecting a sharp decline . To recap, the valuation of the S&P 500, as measured by its blended 12-month forward …
8th October 2021
29th September 2021
It looks like EM exports rose further in August and, possibly, September too. And while we expect them to decline over the coming quarters, they will remain elevated. However, China’s property slowdown means that the risks to the export outlook for some …
The latest data suggest that GDP growth in much of Emerging Asia slowed markedly in Q3, and that the recovery in Emerging Europe lost a bit of steam. Latin American economies generally strengthened, although the property slowdown in China poses a headwind …
27th September 2021
While world goods trade fell in July, the signs are that it perked up a bit in August. But stepping back from the month-to-month moves, global trade flows have broadly flattened out at a high level, and we expect this pattern to continue into 2022. With …
Our China Activity Proxy (CAP) suggests that economic output dropped back sharply in August. The big hit to services activity from efforts to contain the Delta variant should mostly reverse this month. But the downturn in the property sector has further …
The combination of large foreign-currency debt burdens, low FX reserves and weakening currencies means that the risk of sovereign defaults in Sri Lanka and Tunisia is growing. Elsewhere, China’s largest property developer, Evergrande, appears to be close …
9th September 2021
The valuation of industrial and offices deteriorated compared to bonds and equities in Q2 on account of falls in property yields. Meanwhile, retail yields stabilised, leaving valuations broadly unchanged. (See Chart 1.) With government bond yields set to …
2nd September 2021
The latest data show that world trade has flattened off at a high level. While timely indicators suggest that trade is unlikely to reaccelerate, it doesn’t look set to weaken much either. Consequently, bottlenecks at ports, and associated delivery delays …
25th August 2021
Most economies in Emerging Europe and Latin America look set for a strong third quarter and, while the near-term outlook for Southeast Asian economies remains challenging, high-frequency mobility provide early signs that at least parts of the region are …
Download the PDF for the full report. Our monthly Long Run Returns Monitor provides our updated long-term projected returns for major asset classes, as well as a summary of the macroeconomic forecasts which underpin them. All projections in this …
24th August 2021
Our China Activity Proxy (CAP) suggests that output dropped back further in July. This shouldn’t be dismissed as a temporary setback due to the recent virus outbreak. The main drag last month came from industry and construction, where the key headwinds …
Following a sharp deterioration in the previous quarter, property valuations held steady in Q2. But while changes so far in Q3 point to only a slight worsening in valuations, we expect Treasury yields will turn a corner and rise to 1.75% by end-2021, …
23rd August 2021
Having surged over the past year or so, EM exports appear to be peaking as final demand is levelling off and commodity prices are dropping back. That said, exports will likely remain at elevated levels for some time yet. Our seasonally-adjusted measure of …
On our measure, property looked slightly worse value relative to bond and equities in Q2. The worsening was due to a marked fall in property yields, driven by the industrial sector. Outside of over-valued industrial, all other property sectors remained …
16th August 2021
Download the PDF for the full report. While emerging market equities have generally struggled since the previous edition of our Long Run Returns Monitor was published, most other asset classes have fared reasonably well. Most notably, government bond …
30th July 2021
While the pandemic continues to hold back recoveries in Southeast Asia, the near-term outlook appears brighter in Emerging Europe and Latin America. However, low vaccine coverage in the latter means that economies remain susceptible to renewed outbreaks …
Real world goods trade edged down in May, suggesting that the recovery has levelled off. True, this slight fall comes after an impressive rebound since May last year, global trade remains well above its pre-virus level, and trade data are usually …
26th July 2021
Our China Activity Proxy (CAP) suggests that growth accelerated in q/q terms last quarter but that output edged down in June on the back of softer industrial and construction activity. We think China’s COVID-19 rebound has reached its limits and that …
22nd July 2021
After surging over the past year, the latest data provide signs that EM goods exports have now passed their peak. However, they are still likely to stay at elevated levels for some time yet. Our seasonally-adjusted measure of aggregate EM goods exports …
21st July 2021
While we don’t think that risky assets are in a systemic bubble, we suspect there is limited scope for further large increases in valuations to drive their prices higher over the next few years . Despite the fall in equity markets this week, the …
9th July 2021
