Global Markets

Emerging Europe Economics Update

The implications of the Russia-Ukraine crisis

The deadlocked end to talks between Russia, the US and NATO and subsequent hawkish noises from Russian officials have caused a risk premium to emerge on Russian asset prices and will keep the prospect of tighter Western sanctions on the table. The downside risks for the ruble and Russian assets are building, as are the upside risks for European natural gas prices. In view of the wider interest, we are also sending this Emerging Europe Economics Update to clients of our Commodities Overview, Energy, FX Markets and Global Markets services.

14 January 2022

Global Markets Update

We think that China’s equities will continue to struggle

Even though we doubt that China’s equities will fare anywhere near as badly over the next couple of years as they did in 2021, we do not expect them to make strong gains from here either.

14 January 2022

Global Markets Update

Key financial market calls for 2022

We do not think the returns from many financial assets will be as good in 2022 as they were in 2021. For a start, we envisage a sell-off in government bonds in most places, reflecting the outlook for monetary policy. And, in general, we foresee an underwhelming performance from equities, including in the US and China. We expect this backdrop to be accompanied by a further broad-based rise in the US dollar. In view of the wider interest, this Global Markets Update is also available to clients of our Asset Allocation & FX Markets services.

13 January 2022

Our view

We forecast that long-term bond yields will continue to rise across most major economies and especially in the US, where we think inflationary pressures are particularly strong. Otherwise, we think that the returns from most risky assets from here will be far less impressive than they have been since the spring of last year. That reflects not only a view that bond yields will climb further, but also how we see limited room for global growth to surprise on the upside and how, in many cases, valuations already appear quite stretched. Meanwhile, we think that the US dollar will grind higher from here on the back of a hawkish shift by the Fed relative to most other major central banks, and ongoing uncertainty around the strength of the global recovery.

Latest Outlook

Global Markets Outlook

We expect long-term yields to rise further

While long-dated government bond yields have risen quite a bit in recent months, we suspect that continued inflationary pressure and the prospect of tighter monetary policy means they still have some way to climb. We expect yields to rise by the most in the US out of the major economies, as inflationary pressures there still look the strongest. Meanwhile, higher yields may also help limit the upside for risky assets, such as equities and corporate bonds. And with economic growth slowing in many places and expectations for corporate earnings still high, further large gains in equities look unlikely to us in any case.

27 October 2021