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Capital Daily

Capital Daily

Capital Daily

The relationship between the US dollar and the stock market

We anticipate a renewed rally in the US dollar and further declines in US equity prices over the next twelve months or so.

24 May 2022

Capital Daily

We think the peak in Treasury yields is still to come

We doubt that the 10-year Treasury yield has peaked in this cycle. Admittedly, it has fallen back markedly on net over the past couple of weeks; having briefly climbed above 3.20% earlier this month, it is now at around ~2.85%. But, it has risen ~5bp so far today and we suspect that it will climb a lot more over the next 12 months or so.

23 May 2022

Capital Daily

We doubt consumer staples will continue to underperform “tech”

We doubt the consumer staples sector, which has been hit particularly hard in the recent sell-off in the S&P 500, will continue to underperform “tech”-heavy sectors. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

20 May 2022
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Capital Daily

What to make of the latest falls in the S&P 500

Although the S&P 500 has stabilised at the time of writing, its 4% drop yesterday has brought the index close to a bear market. We suspect there may be more pain to come for equities, even if the US economy avoids a recession and the functioning of core markets holds up. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

19 May 2022

Capital Daily

The ECB, the Fed, and the euro

The hawkish tone of the latest flurry of ECB and Fed speakers suggests that, despite the recent drop in equity markets and widening of credit spreads, policymakers are determined to press ahead with aggressive tightening. In particular, the ECB, having been slow out of the gate, appears to be playing catch up. We see three key market implications.

Capital Daily

Near bear market for S&P 500 doesn’t mean it’s out of the woods

The glass-half-full case for US equities is that they have already fallen about as far they do in a typical recession, so they now have plenty of upside if, as we happen to project, the US economy bends rather than breaks. The glass-half-empty rejoinder is that their slump so far this year has mainly reflected an unwinding of lofty valuations in the face of turmoil in the bond market rather than concern about the outlook for growth, which is only recently starting to mount. Our forecast is that the S&P 500 will bottom out at 3,750 in the middle of next year, as a renewed rise in Treasury yields and weaker activity drag it down further. But we wouldn’t be surprised if it fell to a much lower level if we did get a mild recession – a peak-to-trough drop of about a third wouldn’t then seem out of the question to us. That would correspond to a nadir of slightly above 3,200.

17 May 2022

Capital Daily

Some market implications of China’s lockdowns

China’s slowdown could keep the renminbi under pressure, and may have gloomy implications for global markets as well.

Capital Daily

Weighing up the outlook for the S&P 500

History suggests the S&P 500 might recover quite quickly once it reaches its trough, but that may be a way off yet and still-rosy earnings expectations could be an obstacle.

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