Filtered by Subscriptions: Asset Allocation Use setting Asset Allocation
Notwithstanding some weakness today, enthusiasm for tech stocks has returned in recent weeks. We think this enthusiasm will drive the US stock market higher, despite the optimism that is already discounted in equities and the many looming risks. Much of …
15th October 2024
China’s authorities are clearly making an effort to boost the country’s stock market, despite some seeming missteps. But we doubt any further gains will survive very long into next year. The fairly muted reaction in China’s equity markets today were, at …
14th October 2024
We think that the larger rise in yields in the UK than elsewhere over the past month is due to expectations that the Budget will boost demand rather than fiscal fears. That said, there is some upside risk from the Budget to our forecast for gilt yields to …
11th October 2024
A further decoupling of trade ties between the US and China or a sharp rise in Cross-Strait tensions, even if a full-blown conflict is avoided, are two big geopolitical events that we think present a big risk to the health of the “AI bubble” in the US …
The initial market reaction to today’s release of US inflation for September and jobless claims data suggests to us that investors may be more concerned about the latter than about the former. We think both support our view that the 10-year Treasury yield …
10th October 2024
The valuations of “risky” assets continued to rise in the third quarter, both in absolute terms and relative to “safe” asset yields. We think that reflects the start of the Fed’s easing cycle and renewed optimism about the US economy after initial worries …
Market participants have largely shrugged off the news that the US Department of Justice (DoJ) may seek a court-ordered break up of Google. Given the snail’s pace at which the US antitrust process moves at, that probably makes sense. Even so, it’s worth …
9th October 2024
China’s offshore equity market plunged today as the latest policy announcement from Beijing disappointed expectations. With much of the low hanging fruit (as far as valuations are concerned) now plucked, we think the bar is quite high now for further …
8th October 2024
The optimism across US equity and corporate bond markets as the labour market proves resilient makes sense to us. We think it will continue, providing a tailwind for those assets. The blockbuster US employment report for September released on Friday …
7th October 2024
The strong reading on the US labour market released today has taken the 10-year Treasury yield towards our end-2024 forecast of 4%. We expect it to stay around this level, though the risks to the upside appear to have increased over recent weeks. Today's …
4th October 2024
The British pound fell sharply today, and we suspect that it will weaken more over the next year or so given our dovish view of Bank of England policy, the currency’s still-high valuation, and stretched speculative positioning. Sterling has dropped by …
3rd October 2024
Since mid-2022, the average stock in the industrials sector has returned more than the average stock in all other sectors of the S&P 500. This raises the question of whether investors have a rose-tinted view of the economy’s future, since industrials has …
While some drivers of the US stock market’s recent underperformance are likely in our view to persist, we think that they will soon be outweighed by renewed enthusiasm about AI. And only when the associated bubble bursts do we expect US equities to lag …
While the latest escalation of the conflict between Israel and Iran is worrying, our view remains that it would take a significant further widening of the war, including actual disruption to energy supply chains, to make a material difference to the …
2nd October 2024
Brent crude oil has jumped by around 4% to ~$74.5pb at the time of writing, following reports that Iran is preparing a ballistic missile strike against Israel. Much remains uncertain. A key issue – if an attack materialises – will be its size and whether …
1st October 2024
We doubt China’s equities will continue to outperform Japan’s through the end of 2025, despite their recent divergence. Stock markets in two of Asia’s largest economies have continued to head in different directions today. China’s CSI 300, for example, …
30th September 2024
We don’t see compelling reasons for policymakers in the US or the euro-zone to lower policy rates as much as market pricing suggests, so we expect long-dated bond yields there to edge up before long. That would probably be a wash for the euro. Today’s …
27th September 2024
Most EM equities have fared well over the past week or so amid encouraging signs from China, the first Fed rate cut and broadening EM easing cycles. We think these equities will continue to fare well over the coming year, albeit not as well as US ones. …
26th September 2024
We expect equities to fare best among the major asset classes we track through the end of 2025, as the AI bubble reinflates. We suspect government and corporate bonds will generally do less well, despite monetary easing. But we still think they’ll provide …
25th September 2024
We expect equities in Germany to continue rising even though the economy there appears to be in another ‘technical’ recession. But we expect them to lag those elsewhere over the coming year or so. It looks fairly certain that Germany’s economy is in …
Policymakers in China announced major monetary and financial policy stimulus measures today, but we doubt these will be enough to drive a sustained rebound in China’s struggling stock market. China’s equity market jumped today on the announcement of a …
24th September 2024
We think government bond yields in the euro-zone will rebound a bit, particularly in those countries, like France, where public finances are concerning. The September PMIs released today for the euro-zone and its two largest economies painted a very bleak …
23rd September 2024
While we do think the Bank of Japan will surprise with another hike this year, we suspect it will coincide with a more gradual strengthening of the yen rather than the sharp rally we saw last time. As was widely expected, the Bank of Japan left policy on …
20th September 2024
Markets barely reacted to the Fed’s 50bp rate cut, on balance, and our base case is that further cuts won’t move the needle too much either. The Fed started its easing cycle with a bang on Wednesday with a 50bp cut. That said, it was probably a “hawkish …
19th September 2024
Policymakers have put themselves in a tricky spot ahead of today’s pivotal FOMC announcement. But whatever the size of the policy rate cut they end up delivering, the outlook for the US economy is more important in determining where Treasury yields and …
18th September 2024
We doubt the gap between expected interest rates in the US and its trading partners will keep shrinking, given what’s priced into the money markets. That could potentially buoy the dollar in time, assuming the Fed shies away from slashing its policy rate …
17th September 2024
China’s renminbi looked, before the country’s markets closed for the mid-Autumn festival, to have finally beaten this year’s depreciation pressure. Not only did it break its string of weakness to rally against the dollar last month, but measures of …
16th September 2024
US households’ appetite for equities often depends on how confident they feel. Its strength in recent years is therefore rather surprising, given that their mood hasn’t been upbeat. Sentiment did perk up this month, judging by the University of Michigan’s …
13th September 2024
All of the historical data supporting this publication can be found on our new Rate Cuts & Asset Returns dashboard. All of the forecasts in this publication can be found on our US Macro or Financial Markets dashboards. This Focus explores the key lessons …
12th September 2024
Today’s decision by the ECB to cut the deposit rate by 25bp was widely anticipated, and even the press conference provided little new information. We stand by our view that too much easing is now discounted in money markets, which is why we think …
The adverse reaction in the stock market to today’s report on US consumer prices suggests inflation still matters to investors in equities, even if it has become a less important concern for them than economic growth over the past two months. Recall that …
11th September 2024
Although softening global demand for oil has pushed the Brent Crude price to a near three year low, we don’t think the global economic outlook will prevent strong equity gains. While they have often tended to move together in the past, equity and oil …
10th September 2024
Further mixed-to-weak US economic data and sharp falls in the equity markets last week means that, rightly or wrongly, the so-called “Fed put” is now back in the spotlight. Our sense is that it would still take a significant further deterioration in the …
9th September 2024
Although today’s news about the US labour market disappointed investors, we think it is in line with higher Treasury yields and a rebound in US stocks. The market reaction following the US employment report for August appears to reflect increased worries …
6th September 2024
Even though the PBOC is trying to prop up local government bond yields while the Fed is gearing up to cut rates, we think bonds in China will fare a bit better than those in the US. The PBOC has been flagging for some time that it is uncomfortable with …
The Treasury yield curve has steepened in recent weeks amid growing recession concerns, but we doubt one will materialise this time . We expect the curve to steepen further over the next year or so, with 10-year yields rising and 2-year yields falling. …
5th September 2024
We held online Drop-In sessions earlier this week to discuss the outlook for major DM and EM economies and the risks that they face as we look forward to 2025. (See a recording here .) This Update answers some of the questions that we received, including …
Investors' concerns about the health of the US economy have intensified again, contributing to a selloff in global equity markets. The US stock market rode out an earnings recession last year thanks in large part to enthusiasm around AI, but we think it …
4th September 2024
A disappointingly small rebound in the headline index of the US ISM manufacturing survey for August appears to have put some relative pressure on cyclical sectors of the S&P 500 today, which is down more than 1% the time of writing. The bigger picture, …
3rd September 2024
Chinese equities tumbled on Monday, and while we see scope for them to recover a bit in the coming months, we are quite pessimistic about their medium-to-long term prospects. Chinese stocks had a bad start to the month. US equities rose on Friday, which …
2nd September 2024
US and euro-zone inflation data released today did little to change our view that both the Fed and the ECB will cut interest rates by 25bp in September, as investors seem to expect. But we think both central banks will ultimately cut rates by a bit less …
30th August 2024
We think enthusiasm around AI will return before long and inflate the stock market bubble further over the next year or so, supported by a backdrop of resilient economic growth and monetary easing cycles. In turn, we expect the “big-tech” sectors to …
29th August 2024
We think the AI rally has further to run, despite investors’ apparent disappointment with Nvidia’s rapid profit growth. The sag in Nvidia’s share price in after-hours trade, despite seemingly barnstorming profit results , naturally raises the question of …
The ongoing reassessment of the monetary policy outlook in the US and Europe has (again) made the UK look like an outlier. We doubt that will last. Since the start of the summer, expected interest rates have fallen significantly in most major economies, …
28th August 2024
For all the talk about AI, equities in Europe have delivered nearly as much as those in the US over the past few years. But we think that US equities will take the lead more clearly over the next year or so. Only the eventual bursting of an AI bubble …
It’s perhaps surprising that financials have outperformed the S&P 500 during the recent bout of market turbulence . (See Chart 1.) After all, Treasury yields have fallen and the outlook for the US economy has darkened, both of which might have been …
27th August 2024
Fed Chair Powell’s dovish keynote speech at the Jackson Hole conference today has reinforced the sense that not only are FOMC rate cuts imminent, but they may also be front-loaded. That suggests downside risks to our forecasts for US Treasury yields and …
23rd August 2024
Even though Treasury yields have edged up today ahead of Jerome Powell’s speech at Jackson Hole tomorrow, we think there’s still some scope for them to rise further, as we think too much easing is now discounted in money markets. That said, we don’t think …
22nd August 2024
We think Asian currencies will generally continue to rise against the US dollar over time, albeit perhaps not quite as quickly as they have lately. A lot of attention has focused lately on the rally of the Japanese yen. But it’s worth taking note of the …
21st August 2024
Inflation plunge seals the deal on a rate cut in September The larger-than-expected decline in South Africa’s headline inflation rate, to 4.6% y/y, in July strengthens the case for the SARB to start its easing cycle with a 25bp cut to 8.00% at its next …
