Another January price surge has sparked a sell-off in US stocks and bonds, and supports our view that further Fed rate cuts are off the table this year. While we think US equities will resume their rally soon , we expect Treasury yields to rise a bit …
12th February 2025
Although the 10-year TIPS yield has fallen on net since the start of this year, we doubt it will drop to an even lower level by the end of 2025. That’s because we don’t expect the slight further policy easing discounted in money markets to materialise. …
11th February 2025
Gold has soared to another record high today amid a further ratcheting up in trade tensions. However, we think the rally may falter before too long . Gold has climbed by ~1.5% so far today, which has taken it over the $2,900/oz mark for the first time …
10th February 2025
January’s strong US employment report supports our view that the Fed will stay on the sidelines during the rest of 2025, as well as our forecast that the 10-year Treasury yield will end the year higher. The employment report pointed to the labour market …
7th February 2025
We expect the Bank of England to cut faster and further than investors expect, pushing Gilt yields down and in turn weighing on the pound. The Bank of England (BoE) cut its Bank Rate by 25bp to 4.5% today, as widely expected. Even so, the tone of the …
6th February 2025
Tariffs could continue to be a big challenge to China’s renminbi and stock market, but we think both could have a tough year regardless of how trade tensions play out. It was a slightly rough start to the Year of the Snake for China’s onshore financial …
5th February 2025
While we expect the US to start a trade war this year, we doubt that the initial reaction to the tariffs on Monday will necessarily set the tone for 2025. To re-cap, US President Donald Trump announced tariffs on imports from Mexico and Canada over the …
4th February 2025
US President Trump has ended weeks of speculation and announced tariffs on Canada, Mexico, and China. We think there are a few points to note on their implications for global markets. First, despite the big moves so far, investors still seem to be holding …
3rd February 2025
We don’t think US equity market outperformance is over yet, despite the challenge from DeepSeek. The tone in US equity markets has turned more positive lately, with a modest gain on Thursday and futures pointing (at the time of writing) to another in …
31st January 2025
Even though we forecast the 10-year Treasury yield to end 2025 close to its current level, we anticipate that the 10-year Bund yield will fall over the rest of the year as the ECB, unlike the Fed, cuts policy rates further than currently discounted in the …
30th January 2025
While there has not been much market reaction to the speech that UK Chancellor Rachel Reeves delivered today on how to “kickstart economic growth” , we are still quite optimistic about the long-term prospects for UK equities. Some of the key announcements …
29th January 2025
We think it’s too soon to say whether this is the start of a slump for those large US firms which have benefited most from AI hype until now – but if it was, what would it mean for the S&P 500? Our sense is that the index would slip this year, but that …
28th January 2025
News that Chinese start-up DeepSeek’s AI Assistant has usurped US OpenAI’s ChatGPT as the most downloaded free app on Apple’s App Store has dealt the US stock market a blow today, just a week after Stargate was launched to much fanfare. Exports from the …
27th January 2025
We think further tightening by the Bank of Japan will see the 10-year Japanese government bond (JGB) yield rise above that of the 10-year Chinese government bond (CGB), for the first time in more than two decades. The Bank of Japan’s rate hike today had …
24th January 2025
Although developed market (DM) equities outside the US have purportedly benefited from bargain hunting recently, we doubt they will outperform their counterparts in the US over the course of 2025 as a whole. MSCI’s World ex USA Index of DM equities has …
23rd January 2025
Donald Trump’s ringing endorsement of Stargate is another shot in the arm for Artificial Intelligence (AI) in the early days of his second presidency, and supports our long-standing view that the S&P 500 will thrive in 2025 amid growing investment in, and …
22nd January 2025
Contradictory signals around the Trump administration’s plans for tariffs are an early indication that, at least in some ways, Trump’s second term will probably resemble the first. To recap, yesterday saw a sharp sell-off in the US dollar after reports …
21st January 2025
Fresh reports that President Trump will not impose tariffs on Day 1 mean that his inauguration has, quite fittingly, coincided with a volatile day across financial markets. Although we suspect that a fair degree of volatility will persist for a while yet, …
20th January 2025
Equities in Europe have done well so far this year, but we expect them to trail those in the US over the rest of 2025, as the US imposes universal tariffs and enthusiasm about AI returns. This would also mean “big-tech” sectors returning to the front of …
17th January 2025
The Japanese yen has been boosted by the dip in US Treasury yields, and we think it will rally a bit further against the US dollar over 2025. One of the key beneficiaries of the dip in US Treasury yields since the December US CPI print has been the yen, …
16th January 2025
Today’s release of US CPI data for December did not change our view that the Fed will cut its policy rate by a bit more than investors anticipate, and in turn that Treasury yields will edge down further. Although the data were broadly in line with …
15th January 2025
It’s easy to forget the importance of earnings in influencing the S&P 500 when its performance is driven instead, as has been the case recently, by gyrations in the Treasury market. Earnings will be front of mind again tomorrow, though, when reporting …
14th January 2025
We think the recent falls in US equities will unwind before long, with growth and cyclical stocks leading the charge. The sharper ~3% fall in the Russell 2000 index of small-cap (SC) US stocks than the ~2% fall in the S&P 500, its large-cap (LC) …
13th January 2025
Good news has (once again) proved to be bad news for markets, with Treasuries and equities selling off in response to the strong US payrolls report. But we don’t expect this twin sell-off to persist over 2025. December’s blockbuster US employment report …
10th January 2025
UK Gilts have not only been embroiled in a global government bond sell-off, but they have fared worse than others. However, we think that bonds will recover before long, with yields in the UK falling particularly sharply by the end of this year. The …
9th January 2025
Although the Korean won has strengthened this year, we think its rally will unwind before long. The Korean won appears to have embarked on a relief rally lately, bucking the trend of broad US dollar strength. Admittedly, it edged down slightly against the …
8th January 2025
US Treasury yields have surged recently, pulling yields elsewhere up, but we doubt they’ll continue their upward march during the rest of 2025. Long-term Treasury yields have risen further today following the release of the ISM Services Report for …
7th January 2025
Chinese government bond yields have tumbled in recent weeks and we think that has a bit further to run. This fall in yields, alongside our view that US tariffs will be imposed, help inform our forecast for the renminbi to weaken to 8.0/$ by the end of …
6th January 2025
The US dollar has started the year on the front foot. We expect that to continue as the US economy and stock market outperform again while the incoming Trump administration brings in tariffs. While US continued exceptionalism and higher tariffs by now …
3rd January 2025
After a stellar 2024, we expect another strong year for US equities in 2025, on the back of continued enthusiasm about AI and US exceptionalism. Meanwhile, we think equities elsewhere will generally fare poorly, owing to another trade war. The S&P 500 has …
2nd January 2025
W e are sticking to our forecast that the S&P 500 will end next year at 7,000 , despite its slump since this week’s FOMC meeting. That’s even though we think Fed policy will be a bit less accommodative than we had previously projected , and the risk of a …
20th December 2024
We think 2025 will be a better year for the Japanese yen against the US dollar than 2024 has been, as the relative monetary policy picture shifts more decisively in its favour. A Fed cut and a hold from the Bank of Japan (BoJ) might seem like a surprising …
19th December 2024
UK equities have kept up with other non-US ones in recent months despite a string of weak domestic activity data and stubborn inflation pressure. We think they will outperform most non-US markets in 2025, with the FTSE 100 hitting 9,000 by end-2025. The …
18th December 2024
We think corporate credit spreads in the euro-zone will widen only slightly next year, despite dim economic prospects. Corporate credit spreads, as captured by the option-adjusted spreads (OAS) of ICE BofA Corporate Investment grade (IG) and High Yield …
17th December 2024
While equities in Germany have managed to ride out weak growth and political uncertainty this year, those in France have not. We suspect that they will all fare poorly next year, as those adverse conditions remain and a trade war takes a toll. Today …
16th December 2024
The recent breakdown in the relationship between yen/dollar and the relative performance of stock markets in Japan and the US in local-currency (LC) terms makes it hard to predict how these stock markets will fare against one another if, as we envisage, …
13th December 2024
Given our dovish view of ECB policy, we expect German Bund yields to fall back in 2025, and to diverge further from US Treasury yields. Unlike the Bank of Canada (BoC) and the Swiss National Bank (SNB), the European Central Bank (ECB) cut its policy rates …
12th December 2024
The Treasury market has been quite subdued since the US election, including today d espite a slightly disconcerting CPI report . We don’t expect it to become a whole lot more volatile in 2025 either, even allowing for concerns about the fiscal outlook. We …
11th December 2024
While emerging market (EM) dollar bonds have gained some ground lately, they have underperformed US high-yield corporate bonds in total return terms, and we suspect they will continue to lag next year. The stripped spread of the JP Morgan Global EMBI …
10th December 2024
The Hang Seng index enjoyed another stimulus-related boost today but we’ve seen similar spikes before. For now, we’d caution against interpreting the latest developments as confirmation large-scale stimulus is on the way, and we still think Chinese stocks …
9th December 2024
We think the rally in 10-year Treasuries over recent weeks reflects both the incoming US economic data and changing perceptions towards Trump’s policy agenda. But we don’t expect this rally to continue. The November employment report, released today , was …
6th December 2024
Despite their low absolute and relative valuations, we think China’s equities will continue to lag their US counterparts over the coming year . It’s been a good twenty-four hours or so for global equity markets, thanks in part to falling “safe” asset …
5th December 2024
This early edition of the Capital Daily outlines our initial thoughts on the market implications of the political drama in Korea. Rarely does a combined sell-off in a country’s stocks, bonds, and currency feel like a relief rally. But the situation in …
4th December 2024
The probable imminent collapse of the French government is not having much impact on bond markets elsewhere in the euro-zone. And we think contagion risks will remain limited, as long as the monetary union itself is not called into question. One of the …
3rd December 2024
President-elect Trump’s latest tariff threat, this time against the “BRICS” economies, is another early taste of his combative approach to trade policy and its potential impact on financial markets. The chance of a BRICS currency (or another alternative) …
2nd December 2024
The spread between 10-year French and German government bond yields has risen again, and we forecast that it will continue to trend up next year. The spread between the yields of 10-year French OATs and German Bunds has surged in recent days, reaching a …
29th November 2024
National inflation data for November released today suggest that euro-zone inflation has edged up this month, but we think this is just a blip. We still expect inflation to drop below target next year and the ECB to cut interest rates by more than …
28th November 2024
We expect the New Zealand dollar to fall against the US and Australian dollars over the next year or so, and fare worse than most – if not all – other G10 currencies. Today’s as-expected 50bp rate cut by the Reserve Bank of New Zealand (RBNZ) didn’t move …
27th November 2024
We aren’t convinced the outperformance of US small-cap (SC) equities since Donald Trump’s victory on 5 th November sets the tone for the first half of 2025. We doubt they will start to fare better than large-cap (LC) equities over a sustained period until …
26th November 2024
The spread between 10- and 2-year Treasury yields has ‘inverted’ again, partly because the nomination of Bessent as US Treasury secretary has eased fiscal concerns. But we forecast the curve to steepen by more than most expect over 2025 as the Fed …
25th November 2024
