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It’s little surprise that inflation data for February hardly moved the dial for the US stock market – that probably requires clarity on trade policy and signs of economic resilience. Our base case is that both of these will come in the coming months (even …
12th March 2025
As was the case last summer, we think the US stock market will bounce back from its “growth scare”, even if tariffs are involved this time around. After falling by 2.7% yesterday, the S&P 500 is down again today at the time of writing, bringing to about …
11th March 2025
We suspect the jump in bond yields in China will prove short-lived. Deflation reared its head in China again today, with the headline CPI printing at a lower-than-expected --0.7% y/y in February, emphasising, among other things, the problems the country …
10th March 2025
While heightened uncertainty and worries about the US economy may keep investors on their toes for a while yet, we think the risk-on mood in markets will come back before the end of the year. The US Employment Report for February , released today, …
7th March 2025
The dollar has suffered one of its largest weekly falls on record in the wake of President Trump’s latest tariff flip-flip , continued jitters around the health of the US economy and, most importantly, Germany’s historic fiscal policy shift . We have …
The shift in the ECB’s tone today to acknowledge the increased uncertainty surrounding the outlook has pushed euro-zone bond yields up slightly, extending their surge over the past few days. Given recent developments, we have raised our forecasts for the …
6th March 2025
In this Update , we put into context the recent surges in Bund yields, German equities, and the euro that have been triggered by expectations of a significant loosening of fiscal policy in Europe’s biggest economy. We have discussed here the economic …
We don’t see anything in the outcomes of China’s NPC meetings to abandon our upbeat near-term view on the country’s stock market. China’s equities have been pushed in all sorts of directions lately, albeit more up than down. Late last year there was the …
5th March 2025
President Trump’s decision to follow through with tariffs on Canada, Mexico and China, combined with further weak economic data in the US, has resulted in a further flight to safety across financial markets. That may well prove an overreaction – Trump …
4th March 2025
The events of the past two weeks have called into question whether the US is severing ties not just with adversaries such as China but also allies, including Canada, Mexico and the European Union. This would radically alter the shape of the fractured …
While the prospect of more defence spending in Europe is pushing up government bond yields there, we still expect Bund yields to fall back. Meanwhile, even if defence stocks in Europe kept outpacing those in the US, we doubt that would prevent the overall …
3rd March 2025
The greenback has rebounded this week as market participants have started to take President Trump’s continued tariff threats a bit more seriously and risk sentiment has soured. Even so, we think that the probability of significantly higher tariffs is …
28th February 2025
This week’s pull-back in the US stock market and the unravelling of US exceptionalism in equities since Donald Trump returned to the White House on 20 th January have been driven by growing concerns about two key risks that we highlighted here to our …
Notwithstanding recent setbacks, we continue to think that this year will see a major rally in US equity markets, higher Treasury yields, and a stronger dollar. Many of the key trends in financial markets in the run-up to and immediate aftermath of the US …
27th February 2025
Despite growing concerns that tech stocks are "priced for perfection", and the ongoing threat of tariffs, we still expect the S&P 500 to rally over the remainder of this year. The muted after-hours reaction in Nvidia’s share price to yet another stellar …
The greenback has struggled over the past month or so, since President Trump took office. However, we think that a sustained fall in the dollar like that at the start of his first term remains unlikely. While the dollar has rebounded a bit today, it has …
26th February 2025
US Treasuries have continued to rally strongly today amid souring risk appetite. But we expect that the rally will reverse as Trump’s tariff policies prevent the Fed from cutting interest rates this year . Investor sentiment has taken a turn for the …
25th February 2025
The recent underperformance of US equities marks a notable shift in the global market environment – but is this just a temporary state of affairs or the new order of things? Chief Markets Economist John Higgins and Senior Markets Economist Hubert de …
The Australian and New Zealand dollars have fared worse than almost every other currency over the past few months. We think they will continue to do so. The US dollar has been on the back foot lately, unwinding some of its earlier Trump-era gains as US …
Judging by the muted market reaction, investors don’t seem too bothered about the German f ederal election , which took place on Sunday. Notwithstanding the risk-off mood in global markets since the US open, which left Germany’s markets more or less …
24th February 2025
Despite a continued steady stream of headlines out of the Trump administration, currency markets have remained remarkably calm this week. The dollar has stabilised today but remains around its lowest level in two months. That probably reflects a judgement …
21st February 2025
Today’s inflation and PMI data in Japan bolster our view that the 10-year JGB yield will continue to rise. We are sticking to our forecast that it will end 2025 at 1.75%, as the BoJ tightens policy by more than is discounted in the money market. In …
We still think the PBOC will allow the renminbi to depreciate against the US dollar, perhaps quite significantly, by the end of the year. We suspect there are a few reasons that China’s central bank declined to cut its benchmark Loan Prime Rates today …
20th February 2025
Although long-term government bond yields in developed markets (DM) have moved in tandem with those of US Treasuries in recent months, we think they will diverge in the coming months. 10-year government bond yields have risen across the board this week – …
19th February 2025
The decision by the US and Russia to “lay the groundwork” to end the war in Ukraine marks a potentially significant turning point after three years of conflict. Negotiations will take time and the macroeconomic implications will depend on the features of …
18th February 2025
Chinese stocks have generally outperformed those elsewhere in recent weeks amid signs that investors’ enthusiasm over AI is (belatedly) benefiting stocks there. While we agree that the outlook for equities in China has improved, we still think that they …
Increased defence spending in Europe would in our view point not only to higher bond yields but also to wider spreads with German bonds. While industrial equities would presumably benefit, they might not keep outpacing their US peers. For decades, defence …
17th February 2025
Despite Wednesday’s hotter than expected US CPI report, the greenback remains on the backfoot as the dollar “Trump trade” has gone into reverse. Between news on President Trump’s tariffs plans, his steps towards an apparent rapprochement with Russia, and …
14th February 2025
US President Donald Trump’s announcement that he will pursue imposing reciprocal tariffs triggered rallies in bond and equity markets, but we would be surprised if investors were really enthusiastic about the idea. Our assumption is that broad-based …
President Trump’s push for a peace agreement in the Russia-Ukraine war would affect major financial markets mainly through lowering energy prices, especially in Europe. In turn, that would be a boost for equities and currencies in the region. But, unlike …
13th February 2025
Another January price surge has sparked a sell-off in US stocks and bonds, and supports our view that further Fed rate cuts are off the table this year. While we think US equities will resume their rally soon , we expect Treasury yields to rise a bit …
12th February 2025
A slowdown in the economy, alongside an unfavourable external environment, have contributed to declines in the Indian stock market and the rupee. We continue to expect the stock market to fall further and we now expect a further decline for the Indian …
Although the 10-year TIPS yield has fallen on net since the start of this year, we doubt it will drop to an even lower level by the end of 2025. That’s because we don’t expect the slight further policy easing discounted in money markets to materialise. …
11th February 2025
Gold has soared to another record high today amid a further ratcheting up in trade tensions. However, we think the rally may falter before too long . Gold has climbed by ~1.5% so far today, which has taken it over the $2,900/oz mark for the first time …
10th February 2025
January’s strong US employment report supports our view that the Fed will stay on the sidelines during the rest of 2025, as well as our forecast that the 10-year Treasury yield will end the year higher. The employment report pointed to the labour market …
7th February 2025
The dollar’s boost from tariff announcements last weekend proved short-lived and, despite rallying a bit in response to the latest Employment Report , the greenback is set to end the week lower against most currencies. It’s clearer than ever that …
We expect the Bank of England to cut faster and further than investors expect, pushing Gilt yields down and in turn weighing on the pound. The Bank of England (BoE) cut its Bank Rate by 25bp to 4.5% today, as widely expected. Even so, the tone of the …
6th February 2025
Tariffs could continue to be a big challenge to China’s renminbi and stock market, but we think both could have a tough year regardless of how trade tensions play out. It was a slightly rough start to the Year of the Snake for China’s onshore financial …
5th February 2025
While we expect the US to start a trade war this year, we doubt that the initial reaction to the tariffs on Monday will necessarily set the tone for 2025. To re-cap, US President Donald Trump announced tariffs on imports from Mexico and Canada over the …
4th February 2025
US President Trump has ended weeks of speculation and announced tariffs on Canada, Mexico, and China. We think there are a few points to note on their implications for global markets. First, despite the big moves so far, investors still seem to be holding …
3rd February 2025
The dollar looks set to come out on top against most currencies after a week of central bank meetings, corporate earnings and economic data generally shifted yield gaps in its favour and reinforced US exceptionalism. But it is US trade policy that has …
31st January 2025
We don’t think US equity market outperformance is over yet, despite the challenge from DeepSeek. The tone in US equity markets has turned more positive lately, with a modest gain on Thursday and futures pointing (at the time of writing) to another in …
Even though we forecast the 10-year Treasury yield to end 2025 close to its current level, we anticipate that the 10-year Bund yield will fall over the rest of the year as the ECB, unlike the Fed, cuts policy rates further than currently discounted in the …
30th January 2025
While there has not been much market reaction to the speech that UK Chancellor Rachel Reeves delivered today on how to “kickstart economic growth” , we are still quite optimistic about the long-term prospects for UK equities. Some of the key announcements …
29th January 2025
We think it’s too soon to say whether this is the start of a slump for those large US firms which have benefited most from AI hype until now – but if it was, what would it mean for the S&P 500? Our sense is that the index would slip this year, but that …
28th January 2025
News that Chinese start-up DeepSeek’s AI Assistant has usurped US OpenAI’s ChatGPT as the most downloaded free app on Apple’s App Store has dealt the US stock market a blow today, just a week after Stargate was launched to much fanfare. Exports from the …
27th January 2025
The dollar is ending President Trump’s first week back in office on the backfoot. Between the absence of immediate tariffs in this week’s flurry of executive orders, Trump’s renewed attacks on the Fed, and some improved PMI surveys in Europe, the dollar …
24th January 2025
We think further tightening by the Bank of Japan will see the 10-year Japanese government bond (JGB) yield rise above that of the 10-year Chinese government bond (CGB), for the first time in more than two decades. The Bank of Japan’s rate hike today had …
Although developed market (DM) equities outside the US have purportedly benefited from bargain hunting recently, we doubt they will outperform their counterparts in the US over the course of 2025 as a whole. MSCI’s World ex USA Index of DM equities has …
23rd January 2025
We held an online briefing yesterday on Mexico’s economy and how it may be impacted by the Trump administration. (Listen to the on-demand recording here .) This Update answers some the key questions that came up. How do you interpret the threatened 25% …
