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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 …
Lingering fiscal risks in South Africa, alongside the challenging global backdrop, prompt us to expect a dim outlook for the country’s bonds, equities and the rand over the rest of this year. The negative reaction in markets to rumours that South Africa’s …
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 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 …
14th March 2025
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 …
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 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
The unravelling of US exceptionalism in stock markets since Donald Trump returned to the White House on 20 th January has been mainly driven by concerns about the US’ dominance of AI and the relative health of its economy (which has also dragged down …
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
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 …
28th February 2025
The near-term picture for China’s equities looks brighter than we’d previously thought, and we’re revising up our forecasts for them significantly. But, we still think they will underperform those in the US, for example, over the remainder of 2025. …
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 …
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
We think that the US utilities sector will outperform the other 'defensive' sectors in the stock market in 2025 and keep pace with the S&P 500, which we expect to rise to 7,000 this year, as utilities are well-placed to benefit from surging AI power …
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 …
21st February 2025
Germany’s next government looks set to cut taxes and, if the parliamentary maths allow, reform the constitutional fiscal rule. It is also likely to be firmer in its support for Ukraine even as support from the US wanes and to advocate an increase in EU …
20th February 2025
While our bullish year-end forecast of 7,000 for the S&P 500 assumes the index’s absolute valuation will approach its dotcom-era peak, that forecast is comparatively conservative based on relative valuation. If the equity risk premium reached its level 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 …
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 …
We doubt that Donald Trump’s reciprocal tariff threat, nor his broader protectionist agenda, are priced in markets fully. We expect US Treasury yields and the dollar to edge up as these tariffs come into effect. In our view, this, alongside continued …
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
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 …
14th February 2025
Our base case is that Treasury term premia – and yields – rise only a little further. But we think disruptive US trade policy, among other things, poses a threat to that view and, relatedly, to Treasuries’ broader use as a hedge against any downturns in …
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
We expect equities in Germany to underperform those in other major developed markets in the coming year or so because German firms are more exposed to the increase in protectionism which appears to be gathering pace. This will probably be more important …
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
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
The UK stock market appears to be riding high – the FTSE 100 has hit a record high. But local-currency returns from UK equities have been flattered by a weaker pound. In common-currency terms, UK stocks have performed much less impressively, and we expect …
Despite Donald Trump cutting deals with Mexico and Canada, we are not backtracking from our revised view that the Fed will stay on the sidelines for the next six months. (See here .) What’s more, if US tariffs end up close to our assumptions, we think the …
Notwithstanding negative FX returns and a challenging external backdrop brought about by Donald Trump’s agenda, we think Turkish bonds and equities will continue to perform relatively well in 2025, as the continuation of orthodox policymaking in Turkey …
5th 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 …
