We suspect the US dollar will recover some lost ground over the coming months as its usual relationship with rate differentials reasserts itself. Seemingly dovish comments from Fed speakers, including Fed Governor Christopher Waller and Cleveland Fed …
25th April 2025
Despite further encouraging headlines on tariff reduction, a relief rally in Asian markets trading today has been notable by its absence. This reinforces our view that further gains in equity markets will become harder from here. Two stories broke on …
24th April 2025
Both US equities and government bonds have staged a relief rally over the past 24 hours, as concerns about Fed independence and the trade war have eased. But the fact that the rally was sparked largely by conciliatory remarks from US President Trump – …
23rd April 2025
Fears over the independence of the Fed can now be added to the growing list of things troubling investors. Market moves over the past couple of days shed some light on the likely market consequences of any attempt by President Trump to ouster Fed Chair …
22nd April 2025
Policymakers at the ECB appear to agree with us that risks to growth and inflation are increasingly skewed to the downside, supporting our view that the 10-year German Bund yield will stay around its current level and that the euro will give back some of …
17th April 2025
We think China will continue to allow the renminbi to weaken, perhaps all the way to 8.0/$ . Today’s market moves in China emphasise yet again how US trade policy remains the key driver of financial markets right now. Despite a stronger-than-expected Q1 …
16th April 2025
While the dust from the market sell-off continues to settle, there are few signs that the turmoil in equity and sovereign bond markets has sparked broader instability or a self-reinforcing downward cycle. Our base case is that market conditions will …
15th April 2025
The market turmoil sparked by the tariffs announced by US President Donald Trump on “Liberation day” has somewhat eased in the past couple of trading days. Absent further bad news, we think the worst has probably passed for US markets, although we see …
14th April 2025
China’s tit-for-tat retaliation in its rapidly escalating trade war with the US exerted some renewed pressure on equities and the dollar today, with bonds still buffeted by expectations of monetary easing and signs of market dislocation. Our base case …
11th April 2025
US President Trump’s decision to pause the implementation of many of his previously announced tariffs has sent markets – especially equities – soaring, but there are some risk premia remaining that might take longer to fade. We’d flagged only on Monday …
10th April 2025
US Treasuries are not benefitting from market turmoil, and we suspect they will keep struggling. Today, China announced that it would charge an additional 84% tariff on imports from the US starting on Thursday. Unsurprisingly, equity markets didn’t take …
9th April 2025
We think the turnaround in longer-dated Treasury yields has bit further to run, if – and it’s a big if – the worst is now over for the US stock market. One reason for the volte-face in bonds is second thoughts about the prospects for Fed policy after …
8th April 2025
The carnage in global equity markets has continued after President Trump doubled down on his tariff plans, noting that “sometimes you have to take a medicine to fix something”. We still think he will lower the dosage by paring back his tariffs. But, if he …
7th April 2025
It’s not often that the US Employment Report is a sideshow. But that’s been the case today, as the ongoing fall-out from Donald Trump’s swingeing “reciprocal” tariffs and China’s strong response to them have had a bigger effect on the markets. Admittedly, …
4th April 2025
Markets were roiled after Trump announced “Liberation Day” tariffs that were clearly bigger than many (including us) had expected. (Our first thoughts on the economic implications in general are here , and we have already written about the implications …
3rd April 2025
Volatility in the US stock market hasn’t picked up sharply since Donald Trump returned to the White House, despite a very high degree of uncertainty about his economic policies. That may remain the case even after “Liberation Day”, judging by the …
2nd April 2025
Although US corporate credit spreads have taken their cue from US equities over the past couple of years, we don't think they will reach new lows even if equities reach new highs. The sell-off in US stocks that started on the 19 th Feb has been …
1st April 2025
While the recent outperformance of euro-zone stocks relative to US ones may have a bit further to run, we doubt European equities would hold up in absolute terms if US stocks fell much further. The renewed sell-off in the US stock market has added to its …
31st March 2025
The UK may have one of the most shielded economies against US tariffs. But stagflation and fiscal risks at home provide strong headwinds for its bond market. The UK is likely to get to the other side of US tariffs unscathed compared to other economies . …
28th March 2025
Equity investors have stopped ignoring US President Donald Trump’s tariffs announcements. We think they are right to do so. Donald Trump announced yesterday that all finished motor vehicle imports will be subject to a 25% tariff from next Thursday. This …
27th March 2025
We think China’s tech stocks could rally a bit further yet, and perhaps outperform those globally for a while. The breakneck rally in China’s tech stocks has come to a shuddering halt lately. Thanks to a couple of sharp falls they’ve now made no ground …
26th March 2025
While the drop and partial rebound in the US stock market over recent weeks has in many ways followed a familiar pattern, it has also seen some relatively unusual characteristics that point to the potential for a wider and sustained reset in financial …
25th March 2025
Over the past month or so, economic data have generally surprised to the downside in the US, whereas they have done the opposite in the euro-zone. This may be one reason for the intervening shift in the performance of their stock markets. Admittedly, much …
24th March 2025
The prospect of looser fiscal policy in Germany isn’t the only significant reason MSCI’s Europe Index has outperformed its USA Index since Donald Trump returned to the White House. The ‘big-tech’ sectors’ fall from grace in the US has also been very …
21st March 2025
We still expect Treasury yields to rise by the end of the year, despite the seemingly reassuring news for bonds from the Fed on Wednesday. There were, at face value, a few things for Treasury investors to take heart from in the latest Fed meeting. The …
20th March 2025
News that Turkey’s main opposition leader has been arrested today raises concerns over a potential return to unorthodox economic policy in Turkey. While the risks to our relatively upbeat view on Turkey’s financial markets have plainly increased, we think …
19th March 2025
A big spending plan nears in Germany, but that might not mean higher yields or a stronger euro. Germany’s Bundestag, the federal parliament, has agreed today to reform the “debt brake”, the strict constitutional fiscal rule that notably prevents the …
18th March 2025
The prospects for Chinese equities still appear quite bright to us, and in fact we expect that they will keep outperforming those in India over the rest of this year. Chinese equities were a bit of a mixed bag today. China’s offshore equity market …
17th March 2025
The yen shrugged off the results of Japan’s “Shunto” spring wage negotiations today, even though the unions’ demands for another year of strong wage growth were broadly agreed to by firms. That’s not too surprising: it’s been clear for some time that …
14th March 2025
While today's US PPI print supports our view that the Fed will stand pat this year, comments from central bankers in Canada and Japan suggest they may have different views about how over how to respond to the impact of US tariffs on domestic inflation and …
13th March 2025
It’s little surprise that inflation data for February hardly moved the dial for the US stock market – that probably requires clarity on trade policy and signs of economic resilience. Our base case is that both of these will come in the coming months (even …
12th March 2025
As was the case last summer, we think the US stock market will bounce back from its “growth scare”, even if tariffs are involved this time around. After falling by 2.7% yesterday, the S&P 500 is down again today at the time of writing, bringing to about …
11th March 2025
We suspect the jump in bond yields in China will prove short-lived. Deflation reared its head in China again today, with the headline CPI printing at a lower-than-expected --0.7% y/y in February, emphasising, among other things, the problems the country …
10th March 2025
While heightened uncertainty and worries about the US economy may keep investors on their toes for a while yet, we think the risk-on mood in markets will come back before the end of the year. The US Employment Report for February , released today, …
7th March 2025
The shift in the ECB’s tone today to acknowledge the increased uncertainty surrounding the outlook has pushed euro-zone bond yields up slightly, extending their surge over the past few days. Given recent developments, we have raised our forecasts for the …
6th March 2025
We don’t see anything in the outcomes of China’s NPC meetings to abandon our upbeat near-term view on the country’s stock market. China’s equities have been pushed in all sorts of directions lately, albeit more up than down. Late last year there was the …
5th March 2025
President Trump’s decision to follow through with tariffs on Canada, Mexico and China, combined with further weak economic data in the US, has resulted in a further flight to safety across financial markets. That may well prove an overreaction – Trump …
4th March 2025
While the prospect of more defence spending in Europe is pushing up government bond yields there, we still expect Bund yields to fall back. Meanwhile, even if defence stocks in Europe kept outpacing those in the US, we doubt that would prevent the overall …
3rd March 2025
This week’s pull-back in the US stock market and the unravelling of US exceptionalism in equities since Donald Trump returned to the White House on 20 th January have been driven by growing concerns about two key risks that we highlighted here to our …
28th February 2025
Despite growing concerns that tech stocks are "priced for perfection", and the ongoing threat of tariffs, we still expect the S&P 500 to rally over the remainder of this year. The muted after-hours reaction in Nvidia’s share price to yet another stellar …
27th February 2025
The greenback has struggled over the past month or so, since President Trump took office. However, we think that a sustained fall in the dollar like that at the start of his first term remains unlikely. While the dollar has rebounded a bit today, it has …
26th February 2025
US Treasuries have continued to rally strongly today amid souring risk appetite. But we expect that the rally will reverse as Trump’s tariff policies prevent the Fed from cutting interest rates this year . Investor sentiment has taken a turn for the …
25th February 2025
Judging by the muted market reaction, investors don’t seem too bothered about the German f ederal election , which took place on Sunday. Notwithstanding the risk-off mood in global markets since the US open, which left Germany’s markets more or less …
24th February 2025
Today’s inflation and PMI data in Japan bolster our view that the 10-year JGB yield will continue to rise. We are sticking to our forecast that it will end 2025 at 1.75%, as the BoJ tightens policy by more than is discounted in the money market. In …
21st February 2025
We still think the PBOC will allow the renminbi to depreciate against the US dollar, perhaps quite significantly, by the end of the year. We suspect there are a few reasons that China’s central bank declined to cut its benchmark Loan Prime Rates today …
20th February 2025
Although long-term government bond yields in developed markets (DM) have moved in tandem with those of US Treasuries in recent months, we think they will diverge in the coming months. 10-year government bond yields have risen across the board this week – …
19th February 2025
Chinese stocks have generally outperformed those elsewhere in recent weeks amid signs that investors’ enthusiasm over AI is (belatedly) benefiting stocks there. While we agree that the outlook for equities in China has improved, we still think that they …
18th February 2025
Increased defence spending in Europe would in our view point not only to higher bond yields but also to wider spreads with German bonds. While industrial equities would presumably benefit, they might not keep outpacing their US peers. For decades, defence …
17th February 2025
US President Donald Trump’s announcement that he will pursue imposing reciprocal tariffs triggered rallies in bond and equity markets, but we would be surprised if investors were really enthusiastic about the idea. Our assumption is that broad-based …
14th February 2025
President Trump’s push for a peace agreement in the Russia-Ukraine war would affect major financial markets mainly through lowering energy prices, especially in Europe. In turn, that would be a boost for equities and currencies in the region. But, unlike …
13th February 2025
