Risky assets are not significantly overvalued in our view

While the S&P 500 is now above its pre-pandemic level, and US investment-grade corporate bond yields are even lower, we do not think that the valuations of “risky” assets in the US or elsewhere are unsustainably high. In fact, we expect equities and corporate bonds to rally further and many developed market (DM) currencies to make further ground against the US dollar between now and end-2021.
Jonas Goltermann Senior Markets Economist
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Global Markets Update

Fed tightening & the outlook for US corporate bonds

Our baseline forecast envisages that US corporate bond spreads rise only slightly as the Fed raises interest rates over the next couple of years. But we think the risks to this forecast are skewed to higher spreads.

21 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.

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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

More from Jonas Goltermann

FX Markets Update

Taking stock of the carry trade after the FOMC’s surprise

While the shift towards rate hikes in several key emerging markets has provided a boost to their currencies, we doubt that the carry trade will fare as well in the second half of the year.

6 July 2021

Capital Daily

This may be as good as it gets for the Aussie and Kiwi

Although the RBA’s hawkish message today and further strong data out of New Zealand sent the Aussie and Kiwi higher, we are becoming less confident in our existing, bullish forecasts for both currencies. In our view, much of the good news on strong domestic recoveries and monetary policy normalisation in Australia and New Zealand is now discounted, but the downside risks from the economic slowdown in China and its impact on commodity prices are underappreciated.

6 July 2021

FX Markets Weekly Wrap

The US dollar rally may have further to run

The US dollar is ending the week stronger against most currencies, although it has fallen back a little this afternoon despite the stronger-than-expected non-farm payrolls report. While that reaction is perhaps a bit puzzling, the bigger picture is that the greenback has extended its post-FOMC rally against the other major currencies this week. We expect it to make further headway, provided that US data continue to come in strong.

2 July 2021
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