Bank equities may be on the road to nowhere

We suspect that banks’ share prices will rebound a bit from here, after falling a long way. Nonetheless, we don’t think that banks will outperform other sectors significantly, or for long, even if the global economy starts to recover and equity markets continue to recoup their coronavirus-induced losses.
Jonas Goltermann Senior Markets Economist
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Global Markets Outlook

We don’t expect the rally in bond markets to continue

While long-dated government bond yields have plummeted in recent months, we suspect that high inflation and the prospect of tighter monetary policy will see them turn a corner before long. We forecast long-term yields to rise across most major economies, especially in the US, where inflationary pressures look particularly strong. Higher yields may also help limit the upside for risky assets, such as equities and corporate bonds. Their valuations already appear fairly stretched in many cases. And when it comes to equities, an extremely strong rebound in corporate earnings already appears to be discounted. As a result, we forecast only small gains in equities across both DMs and EMs, and expect credit spreads to narrow only a little, if at all, from here.

30 July 2021

Global Markets Update

We doubt global saving will stop US yields from rising

In the early 2000s, a ‘glut’ of global saving may have helped restrain rises in long-term US bond yields, even as investors began to discount tighter monetary policy. We don’t think that similar factors explain the latest fall in yields, nor do we expect them to prevent yields from rising over the next couple of years.

28 July 2021

Global Markets Update

We expect E-Z “peripheral” spreads to remain low

While we no longer expect peripheral spreads to narrow this year, we still think that they will remain close to their current levels, which are close to the lowest since the Global Financial Crisis.

23 July 2021

More from Jonas Goltermann

FX Markets Weekly Wrap

Lacklustre payrolls report leaves the dollar hanging

In another see-saw week for FX markets, the US dollar again looks to be ending it broadly flat after the key non-farm payroll figure proved somewhat weaker than consensus expectations. Next week’s US inflation print looks set to continue the data rollercoaster – the payrolls report indicated strong wage growth (0.5% m/m), pointing to growing price pressures in the US economy.

4 June 2021

FX Markets Update

Why we remain bearish on the renminbi

We continue to think that the renminbi will end the year weaker against the US dollar and, while not an essential factor in that forecast, the recent steps by China’s policymakers to weaken the currency reinforces our view that the renminbi is nearing a turning point.

4 June 2021

FX Markets Update

What to make of the commodity currency divergence

Several emerging market commodity currencies have struggled this year, despite the rally in most commodity prices. We think that most will face further headwinds, even the current valuation gap may provide some buffer.

1 June 2021
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