End of QT unlikely to affect bond valuations much

In his semi-annual testimony to Congress, Jerome Powell reiterated that the Fed is deciding how and when to end its balance sheet rundown. Although some officials have indicated that it could finish as soon as this year, we doubt that this would have a big effect on the valuation of US Treasuries.
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Global Markets Update

We don’t expect higher inflation to derail US equities

While we think that inflation in the US will prove more persistent than both the Fed and investors appear to anticipate, we still expect the S&P 500 to make some further gains over the next couple of years.

11 June 2021

Global Markets Update

We expect the tailwind to stocks from commodities to fade

The rise in commodity prices has boosted some commodity-heavy stock markets, but we suspect that it will run out of steam before long, limiting those stock markets’ gains over the next couple of years.

10 June 2021

Global Markets Update

Assessing the outlook for EM monetary policy & LC bonds

While we expect the yields of 10-year emerging market (EM) local-currency (LC) government bonds to increase as the US 10-year Treasury yield resumes its rise, we think increases in yields will generally be smaller than in the US. This reflects our view that most EM central banks will tighten policy more slowly than investors currently anticipate.

4 June 2021

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Commodities Weekly Wrap

Middle East tensions back in the spotlight

Having surged this week, the price of oil could rise further in the near term if tensions between Iran and the US continue to escalate. At the same time, the price of gold is benefitting from an increase in safe-haven demand and a weaker US dollar. The prices of most industrial commodities also rose this week as both the Fed and the ECB signalled looser monetary policy and President Trump announced that he would meet with President Xi on the sidelines of the G20 meeting. Markets will be closely watching events in the Gulf over the next few days. Elsewhere, the G20 summit in Osaka, Japan, gets under way on Friday and all eyes will be on the Trump-Xi meeting. Even if some sort of trade agreement is reached between the two leaders, we do not think it will last. A deal which would be acceptable to both sides appears increasingly remote. We suspect that by early next year, nearly all of China’s exports to the US will be subject to tariffs. Finally, the biannual OPEC and OPEC+ meetings that had been scheduled for next week have been postponed until 1st-2nd July, reportedly because Russia was keen that the meetings be held after the G20.

21 June 2019

Africa Economics Weekly

Easing cycle gains momentum, no news from SONA

Inflation figures released in South Africa and Nigeria this week supported our view that policymakers in both countries will loosen monetary policy later this year. Rates elsewhere are already falling; the Bank of Mozambique cut by 25bp this week. President Cyril Ramaphosa’s State of the Nation Address was disappointingly light on substance, suggesting that divisions within the ANC are hobbling policymaking.

21 June 2019
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