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We think the recent outperformance of euro-zone equities over US ones has run its course. The eight-day winning streak in the S&P 500 may break today, after the market opened down over 1% on news that the US economy unexpectedly contracted in Q1 , on …
30th April 2025
The US stock market and the dollar have fared worse over the last hundred days than they fared during the first hundred days of all other presidential terms since 1980. What’s more, there has been an intervening rout in the Treasury market. It is hard to …
29th April 2025
Although the Liberals have just missed out on a majority, Prime Minister Mark Carney should still be able to implement his fiscal plans with support from the NDP or Bloc Québécois. If anything, the need to grant concessions to those parties means fiscal …
Financial markets have staged a robust recovery over the past couple of weeks, even if they are for the most part not quite back to square one after the post-2 nd April turmoil. Given the ongoing uncertainty around US trade policy and the economic outlook …
28th April 2025
Financial markets have continued to stabilise and the dollar has finally rebounded a little over the past few days. More than anything, that appears to reflect relief after the Trump administration has suggested it may dial back tariffs a bit further and …
25th April 2025
The sharp fall in the dollar over the past three months can for the most part be explained by a rapid reassessment of the outlook for the US economy and financial markets, rather than an imminent threat to the dollar’s dominant status in global finance. …
We suspect the US dollar will recover some lost ground over the coming months as its usual relationship with rate differentials reasserts itself. Seemingly dovish comments from Fed speakers, including Fed Governor Christopher Waller and Cleveland Fed …
Despite further encouraging headlines on tariff reduction, a relief rally in Asian markets trading today has been notable by its absence. This reinforces our view that further gains in equity markets will become harder from here. Two stories broke on …
24th April 2025
Both US equities and government bonds have staged a relief rally over the past 24 hours, as concerns about Fed independence and the trade war have eased. But the fact that the rally was sparked largely by conciliatory remarks from US President Trump – …
23rd April 2025
Fears over the independence of the Fed can now be added to the growing list of things troubling investors. Market moves over the past couple of days shed some light on the likely market consequences of any attempt by President Trump to ouster Fed Chair …
22nd April 2025
Policymakers at the ECB appear to agree with us that risks to growth and inflation are increasingly skewed to the downside, supporting our view that the 10-year German Bund yield will stay around its current level and that the euro will give back some of …
17th April 2025
While the turmoil across financial markets has eased a bit this week, the dollar has continued to weaken across the board. The gap between actual exchange rates and what short-term interest rate differentials point to has widened a bit further, suggesting …
Our base case is that the turmoil across financial markets in the wake of President Trump’s “Liberation Day” announcement will continue to stabilise. As such, we assume that most asset prices and the dollar will recover some ground, with equities faring …
We think China will continue to allow the renminbi to weaken, perhaps all the way to 8.0/$ . Today’s market moves in China emphasise yet again how US trade policy remains the key driver of financial markets right now. Despite a stronger-than-expected Q1 …
16th April 2025
While the dust from the market sell-off continues to settle, there are few signs that the turmoil in equity and sovereign bond markets has sparked broader instability or a self-reinforcing downward cycle. Our base case is that market conditions will …
15th April 2025
The ongoing fallout across financial markets from President Trump’s “Liberation Day” announcement has resulted in a sharp fall in the dollar and what looks increasingly like a generalised loss of confidence in the US as a safe haven in currency and bond …
The market turmoil sparked by the tariffs announced by US President Donald Trump on “Liberation day” has somewhat eased in the past couple of trading days. Absent further bad news, we think the worst has probably passed for US markets, although we see …
14th April 2025
Available data don’t give a definitive answer to whether sales by Chinese institutions contributed to the recent volatility in the US bond market. But China’s state managers of foreign assets still appear to have more than half of their portfolios …
After another tumultuous week across financial markets, the dollar is on track for one of its worst weeks on record. At this point, the main question for the dollar is no longer what the direct effects of President Trump’s tariffs (many of which were …
11th April 2025
China’s tit-for-tat retaliation in its rapidly escalating trade war with the US exerted some renewed pressure on equities and the dollar today, with bonds still buffeted by expectations of monetary easing and signs of market dislocation. Our base case …
US President Trump’s decision to pause the implementation of many of his previously announced tariffs has sent markets – especially equities – soaring, but there are some risk premia remaining that might take longer to fade. We’d flagged only on Monday …
10th April 2025
US Treasuries are not benefitting from market turmoil, and we suspect they will keep struggling. Today, China announced that it would charge an additional 84% tariff on imports from the US starting on Thursday. Unsurprisingly, equity markets didn’t take …
9th April 2025
We think the turnaround in longer-dated Treasury yields has bit further to run, if – and it’s a big if – the worst is now over for the US stock market. One reason for the volte-face in bonds is second thoughts about the prospects for Fed policy after …
8th April 2025
The carnage in global equity markets has continued after President Trump doubled down on his tariff plans, noting that “sometimes you have to take a medicine to fix something”. We still think he will lower the dosage by paring back his tariffs. But, if he …
7th April 2025
President Trump’s extraordinary “Liberation Day” announcement has prompted a major risk-off event across financial markets, sending safe-haven currencies soaring and commodity currencies crashing. It has also put paid to the idea that his aggressive …
4th April 2025
It’s not often that the US Employment Report is a sideshow. But that’s been the case today, as the ongoing fall-out from Donald Trump’s swingeing “reciprocal” tariffs and China’s strong response to them have had a bigger effect on the markets. Admittedly, …
Korea’s Constitutional Court upheld President Yoon’s impeachment today which should ease concerns around Korea’s institutional frameworks. With fresh presidential elections now set to occur soon, there is a chance that fiscal policy will be loosened but …
We hosted two online Drop-In sessions on 3 rd April to discuss the fallout from President Trump’s Liberation Day tariff announcement. (See a recording here .) This Update contains answers to some of the questions that we received and links to several more …
3rd April 2025
Markets were roiled after Trump announced “Liberation Day” tariffs that were clearly bigger than many (including us) had expected. (Our first thoughts on the economic implications in general are here , and we have already written about the implications …
Volatility in the US stock market hasn’t picked up sharply since Donald Trump returned to the White House, despite a very high degree of uncertainty about his economic policies. That may remain the case even after “Liberation Day”, judging by the …
2nd April 2025
Although US corporate credit spreads have taken their cue from US equities over the past couple of years, we don't think they will reach new lows even if equities reach new highs. The sell-off in US stocks that started on the 19 th Feb has been …
1st April 2025
While the recent outperformance of euro-zone stocks relative to US ones may have a bit further to run, we doubt European equities would hold up in absolute terms if US stocks fell much further. The renewed sell-off in the US stock market has added to its …
31st March 2025
Despite President Trump’s decision to jump the gun with tariffs on the auto sector this week (ahead of next week’s widely trailed announcement on 2 nd April), the dollar is ending the week broadly flat on net. In part, that may be on account of the damage …
28th March 2025
The UK may have one of the most shielded economies against US tariffs. But stagflation and fiscal risks at home provide strong headwinds for its bond market. The UK is likely to get to the other side of US tariffs unscathed compared to other economies . …
Equity investors have stopped ignoring US President Donald Trump’s tariffs announcements. We think they are right to do so. Donald Trump announced yesterday that all finished motor vehicle imports will be subject to a 25% tariff from next Thursday. This …
27th March 2025
We think China’s tech stocks could rally a bit further yet, and perhaps outperform those globally for a while. The breakneck rally in China’s tech stocks has come to a shuddering halt lately. Thanks to a couple of sharp falls they’ve now made no ground …
26th March 2025
While the drop and partial rebound in the US stock market over recent weeks has in many ways followed a familiar pattern, it has also seen some relatively unusual characteristics that point to the potential for a wider and sustained reset in financial …
25th March 2025
It is becoming clear that President Trump’s actions are driven by both his fixation on reducing the US trade deficit and his transactional approach to dealing with other countries. So, even though the Trump administration’s ideas to transform the entire …
Over the past month or so, economic data have generally surprised to the downside in the US, whereas they have done the opposite in the euro-zone. This may be one reason for the intervening shift in the performance of their stock markets. Admittedly, much …
24th March 2025
The dollar is ending the week broadly flat on net, continuing its stabilisation after February’s sell-off. With the latest round of central bank policy announcements in the rear view mirror (having brought no major surprises) and the Trump …
21st March 2025
The prospect of looser fiscal policy in Germany isn’t the only significant reason MSCI’s Europe Index has outperformed its USA Index since Donald Trump returned to the White House. The ‘big-tech’ sectors’ fall from grace in the US has also been very …
We still expect Treasury yields to rise by the end of the year, despite the seemingly reassuring news for bonds from the Fed on Wednesday. There were, at face value, a few things for Treasury investors to take heart from in the latest Fed meeting. The …
20th March 2025
News that Turkey’s main opposition leader has been arrested today raises concerns over a potential return to unorthodox economic policy in Turkey. While the risks to our relatively upbeat view on Turkey’s financial markets have plainly increased, we think …
19th March 2025
A big spending plan nears in Germany, but that might not mean higher yields or a stronger euro. Germany’s Bundestag, the federal parliament, has agreed today to reform the “debt brake”, the strict constitutional fiscal rule that notably prevents the …
18th March 2025
While a notable shift in Canadian fiscal policy is likely regardless of who wins the upcoming election, we doubt this will move the needle for the loonie or Canadian government bonds, given that the outlook for Canadian financial markets depends more on …
The prospects for Chinese equities still appear quite bright to us, and in fact we expect that they will keep outperforming those in India over the rest of this year. Chinese equities were a bit of a mixed bag today. China’s offshore equity market …
17th March 2025
The dollar has stabilised after its historic tumble last week, with the DXY index set to end broadly flat on the week. At the margin, the greenback was lifted by relatively hot CPI and PPI data this week, which we think point to a 0.35% rise in the core …
14th March 2025
The yen shrugged off the results of Japan’s “Shunto” spring wage negotiations today, even though the unions’ demands for another year of strong wage growth were broadly agreed to by firms. That’s not too surprising: it’s been clear for some time that …
While today's US PPI print supports our view that the Fed will stand pat this year, comments from central bankers in Canada and Japan suggest they may have different views about how over how to respond to the impact of US tariffs on domestic inflation and …
13th March 2025
Our Interactive Markets Chart Pack gives you a comprehensive and timely view of the latest developments in financial markets, and how we expect them to perform in 2025 and beyond. The Chart Pack can be downloaded in PDF form using the Download button on …
