Global Markets

Global Markets Outlook

Global Markets Outlook

We expect higher yields to dampen the rally in “risky” assets

We continue to forecast that a strong recovery in the global economy and ongoing policy support will drive further increases in developed market (DM) and emerging market (EM) equities over the next couple of years. But given our view that the yields of 10-year government bonds in most DMs will rise from here, especially in the US, we suspect that the gains in equities will be small, and fairly similar across both DMs and EMs. Rising 10-year yields would probably also limit the upside for other “risky” assets. For example, we now think that DM corporate bonds will tread water, although the prospects for the high-yield segment are generally better in our view. We have also downgraded our forecasts for EM dollar-denominated sovereign and corporate bonds.

30 April 2021

Global Markets Outlook

Despite bubble talk, we expect risky assets to rise more

We continue to forecast that risky assets generally will fare well over the next couple of years as the global economy recovers and monetary policy remains accommodative. Despite their rapid rise since the start of November, we don’t think that equity markets have necessarily become overvalued. In our view, lower interest rates mean that the sustainable levels of price/earnings ratios have risen and, despite signs of froth in some market segments, we do not think that we are currently in the late stages of a broad-based bubble in risky assets. Finally, we continue to expect that government bond yields will remain at very low levels, and the US dollar will lose ground gradually against most other major currencies.

29 January 2021

Global Markets Outlook

We forecast stronger equities and a weaker dollar

We continue to think that risky assets will gain more ground and that the US dollar will weaken against a backdrop of a recovering global economy and continued accommodative monetary policy. In our view, the outcome of the recent US elections and the news that a vaccine for COVID-19 may become available earlier and be more effective than previously anticipated has improved the distribution of potential outcomes for the economy and risky assets. We have revised up our forecasts for equity markets and for most major currencies vis-a-vis the greenback. We still think that government bond yields will remain at very low levels. The two key risks to this forecast are i) that the pandemic takes another turn for the worse over the winter and a vaccine still takes a long time to develop, produce, and distribute; and ii) that policymakers withdraw support prematurely, undermining the economic recovery and the prospects for risky assets.

13 November 2020
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Global Markets Outlook

We think the rally in risky assets will continue

While risky assets have already rebounded a long way since their lows in March, we think that they will generally make further ground over the coming months, albeit at a slower pace. That view is underpinned by our forecast that the global economy will continue to recover, even if more slowly and unevenly than during its initial bounce-back over the past few months, and that ample policy support will remain in place for as long as it is needed. Even though our forecasts are built on relatively conservative assumptions about the evolution of the coronavirus pandemic, the possibility that the recent resurgence of new cases forces renewed restrictions on economic activity remains the key risk to our generally optimistic views.

7 August 2020

Global Markets Outlook

We think the recovery in risky assets has further to go

We forecast further gains in most risky assets between now and the end of next year. This reflects our expectation of a rebound in economic activity starting in the second half of 2020, alongside the continuation of massive monetary and fiscal policy support. Admittedly, risky assets have already recovered quite a lot of the ground that they lost after the outbreak of coronavirus. And two key downside risks remain. First, success in containing the virus could be reversed as economies reopen. Second, the consensus for policy support might break down. But assuming these risks do not materialise, we anticipate that the rally will continue.

30 April 2020

Global Markets Outlook

Weak recovery likely to leave markets treading water

After a stellar 2019 for most risky assets, we think that they will generally make only small gains in 2020. Admittedly, our forecasts assume that the effects of the coronavirus outbreak on markets will eventually unwind, since we simply don’t know how it will evolve. But regardless of that, we think that the global recovery will be uneven and weaker than investors hope. With another big dovish surprise from central banks like the one that boosted valuations in 2019 also unlikely, we don’t expect equities to gain much. Finally, we think that bond yields will rise in the US and UK but edge down elsewhere, and that the US dollar will strengthen further.

Global Markets Outlook

Road ahead still looks bumpy for equities

We have revised up our end-2019 forecasts for equities, which previously pointed to a large correction. But even without this big pothole, we continue to think that the road ahead for them will be bumpy. Admittedly, we had underestimated the extent to which looser monetary policy would shore up stock markets. But the further easing that we anticipate in some cases is already discounted. Meanwhile, with the global economy likely to remain in the doldrums, and the US-China trade war not going away, we suspect that corporate earnings will struggle to live up to investors’ expectations of a rebound.

Global Markets Outlook

Road ahead still looks bumpy for equities

31 October 2019
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