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Faster growth in earnings per share (EPS) is the main reason why equities in the US have fared better in local-currency (LC) terms than those in the euro-zone since the Global Financial Crisis (GFC). With than in mind, today’s GDP releases for the US and …
30th July 2025
Most of the recent increase in long-term bond yields appears to have been driven by higher expectations for short-term interest rates as well as reduced demand from traditional investors in long-dated JGBs. Fiscal concerns don’t seem to be playing a major …
India is now home to some of the world’s largest financial markets, but foreign access remains limited. That will change over time as policymakers continue to liberalise the capital account, but it is likely to be a gradual process. The growth of India’s …
29th July 2025
It’s increasingly looking as though the S&P 500 will continue to power ahead. At the time of writing, S&P 500 futures were pointing to fresh all-time high at Tuesday’s open. But even if it slips a bit, the index has probably already surpassed an …
Euro-zone equities have, in general, already given back much of their gains after this weekend’s trade deal between the US and the EU. And we don’t foresee a new wave of euro-zone exceptionalism. One reason is our view of the euro, which fell quite …
28th July 2025
The recent rout in superlong JGBs mainly reflected waning demand from within Japan. Although that trend may not reverse because it is partly structural, we doubt the slump will continue for four reasons. While superlong government bonds have typically had …
The combination of some relatively hawkish signals from the ECB yesterday and some more soggy data out of the UK has sent the euro to its strongest level against sterling since late 2023. We think there is more to come on that front as the BoE continues …
25th July 2025
The ECB has left rates unchanged and, with inflation at target, we now suspect its monetary easing cycle is over. So bond yields are unlikely in our view to fall much, particularly at the short end. We still expect the euro to fall, but that reflects our …
24th July 2025
We held an online Drop-In session yesterday (see here for a recording) to discuss the latest developments in Japan’s economy and financial markets. This Update answers several of the questions that we received . What has the economic impact of higher US …
We think Japan’s equities will do well over the rest of this year, even accounting for their big rally today, and that the yen will recover in time. But, the trade announcement looks like worse news for JGBs, especially at the front end. US President …
23rd July 2025
Government bond yields in the euro-zone are converging, and we expect the “peripheral” frontier to keep blurring. Fears about deteriorating public finances are mounting in many places – for instance, Gilt yields opened higher today as an early data …
22nd July 2025
We held an online Drop-In session last week to discuss the outlook for equity, bond and currency markets. (See a recording here .) This Update answers several of the questions that we received. Tech/AI-driven equities are pushing the US equity markets …
The result of this weekend’s Upper House election in Japan may not reverse the recent rout at the very long end of the JGB market when it re-opens after a holiday on Monday, given the possibility that fiscal policy will be loosened in due course. But …
21st July 2025
We think France’s government borrowing costs will rise above those of Italy before long. This may seem surprising in light of Italy’s higher debt burden and lower trend growth rate, but it reflects the fact that France’s debt dynamics are worse and its …
While trade and overcapacity related risks remain, we see a bright outlook for China’s equities. But we expect a more challenging path for its bonds and currency over the remainder of the year. Until recently, China’s stock market had been under quite a …
We don’t think worries about Japan’s fiscal position are too severe, and expect the country’s equities and exchange rate, at least, to recover by the end of the year. At face value, concerns about Japan seem to be building again. The yen, for example, has …
18th July 2025
Yesterday’s reports that President Trump is considering firing Fed Chair Powell imminently were quickly denied and most key market prices have reverted to roughly where they were before the news broke. But the sharp price swings in the hour or so between …
17th July 2025
Yesterday’s further ‘narrowing’ of the US stock market will have left it increasingly ‘concentrated’. But we don’t think these trends will reverse any time soon. And they may strengthen next year. To re-cap, more than 90% of the stocks in the S&P 500 fell …
16th July 2025
The latest US CPI report showed limited sign of any tariff impact but we continue to think that a rebound in inflation remains a headwind to US stock and bond markets this year – though it would probably help to drive a rebound in the US dollar. US CPI …
15th July 2025
A lowering of the South Africa’s inflation target is being hotly debated among policymakers and we are now factoring in a change to the target, from 3-6% now to 3±1%, into our forecasts. The Reserve Bank is unlikely to have a problem meeting the new …
The Trump administration’s continued re-escalation of tariffs threats have so far made limited impact on financial markets, but one key difference in the way market participants have digested the recent flurry of threats is that the dollar has …
14th July 2025
Although estimates of the 10-year Treasury term premium vary, most approaches suggest that it currently sits at around its highest level in a decade or so. We expect it to remain elevated over the coming years. The first and perhaps most widely used …
We think the outperformance of Mexican assets and the peso since “Liberation Day”, owing to large tariff exemptions for exports to the US, has largely run its course. Instead, we think the weak economic backdrop in Mexico and the risk of renewed …
11th July 2025
We think concerns about government deficits could put further pressure on long-dated bonds. Tests of investors’ nerves have come thick and fast lately, with the latest being a hike in tariffs in Canada. But, despite some small wobbles, the big picture is …
Donald Trump’s planned imposition of a 50% tariff on Brazil for seemingly political reasons may represent a new milestone, but Brazil simply isn’t a big enough trading partner of the US to rattle global markets. For that to happen, negotiations with …
10th July 2025
Even if tariffs on US imports don’t rise substantially more next month for many countries after yet another delay, who is ‘paying’ for the increases in tariffs that have already occurred and appear likely to remain in place? The Q2 earnings season, which …
9th July 2025
Market participants have largely shrugged off President Trump’s latest set of threats to raise tariffs on a range of countries, focusing on the fact that today’s “deadline” for re-imposing the “reciprocal tariffs” from 2 nd April has, as widely expected, …
8th July 2025
In this Update, we answer the key questions about what stablecoins are, whether they will become more widely used and what implications they have for the US Treasury market. What are stablecoins? Stablecoins are a type of cryptocurrency, whose value is …
Despite the uncertainty about tariffs, we continue to expect US markets – especially equities and the dollar – to rally over the rest of the year. There have been two key parts of the US tariff drama that have mattered for markets over the past couple of …
7th July 2025
There may be little to stand in the way of further gains in the S&P 500 this summer, provided today’s enactment of the ‘One Big Beautiful Bill’ is followed next week by a market-friendly decision on tariffs and the upcoming earnings season doesn’t spring …
4th July 2025
Another robust US payrolls report supports our view that the FOMC will remain on hold this year and, in turn, our forecast for Treasury yields and the dollar to rebound over the coming months. Today’s June US non-farm payrolls report came in stronger than …
3rd July 2025
We still think gilts will rally over the rest of this year even if fiscal concerns don’t entirely abate, as the Bank of England cuts interest rates by more than investors seem to expect. But concerns about debt levels and a dovish central bank could be a …
Given the limited progress in concluding trade negotiations since Liberation Day, there is a risk that huge tariffs will be imposed on 9 th July after the 90-day pause expires. We suspect that further last-minute concessions will be made to permit …
2nd July 2025
We expect Treasuries to struggle over the rest of the year, despite their recent strong run. At the time of writing, Treasuries’ weeks-long rally seemed to have hit pause . One trigger seemed to be Fed Chair Powell’s comments at the ECB’s Sintra …
The weakness in the dollar in June was easier to explain than its slide in April and May since – unlike in those months – it was accompanied by a shift in bond yields that might have been expected to weigh on the greenback. Even so, there is still a lot …
1st July 2025
With the S&P 500 at a new all-time high, its fall of more than 20% earlier this year already seems like a distant memory. However, we don’t think it’s really back to square one for US equities. For a start, equity indices tend to follow an upward trend. …
30th June 2025
Although the US dollar has tumbled as President Trump has ramped up the pressure on the Fed to cut rates, we don’t think investors are that concerned about the central bank’s independence yet. But the longer the attacks go on, the greater the pressure on …
27th June 2025
With the noise around US tariffs and war in the Middle East fading, at least for now, we think the stage is set for some further decent returns from “risky” assets – especially US equities – over the next couple of years. But we suspect commodities will …
26th June 2025
The Fed’s proposed loosening of supplementary leverage ratio (SLR) rules for big banks might help to improve demand for Treasuries, but we’re not yet persuaded it will outweigh the other headwinds facing the world’s largest bond market. Treasuries have …
With the S&P 500 almost back at a record-high, we take stock of the different drivers of the US stock market’s recent (mis)fortunes. We suspect that the conditions will soon be back for equities in the US to lead those in the rest of the world. Four …
25th June 2025
The overnight announcement of a ceasefire between Israel/US and Iran has brought commodity and financial markets largely back to their pre-conflict square one. While tensions remain high and could easily re-ignite, our sense is that attention will now …
24th June 2025
This Update answers five key questions about a potential “closure” of the Strait of Hormuz and the potential impacts on global energy markets from any attempt to close the waterway. As it stands, it is arguably not in Iran’s best interests to close the …
23rd June 2025
US involvement in the Israel/Iran conflict has so far prompted just some volatility in global financial markets, with most major asset classes ultimately not far away from where they were on Friday. It’s easy, though, to see growing downside risks. …
In general, stock markets tend to be less affected by energy markets today than in the past. But the Israel-Iran conflict has already produced some interesting patterns in stock markets around the world amid a rise in energy prices. Much has been made of …
20th June 2025
Taiwan’s stock market has been a key beneficiary of the AI boom and was one of the top performers in the world in 2024. This year though, equities in fellow Asian tech heavyweight Korea have taken some of the spotlight. We expect Taiwan to be back on top …
We continue to think Treasury yields will rise, as the Fed stays on hold longer than investors expect. There was minimal market reaction on Wednesday (local time) to a cautious Fed : policy was left on hold, the statement was almost unchanged, and the …
19th June 2025
Fears that the US may get involved in the ongoing Israel-Iran conflict have led to another pick-up in oil prices and renewed jitters across financial markets. The impact so far remains limited, but as the conflict continues the risk of a more material …
18th June 2025
Oil prices could feasibly surge to $130-150pb were hostilities between Israel and Iran to escalate in a way that resulted in major disruption to Middle Eastern energy exports and/or shipping through the Strait of Hormuz. However, so long as the conflict …
This Update outlines potential outcomes of the Iran-Israel conflict and teases out the implications for the region, the global economy and commodity and financial markets. One point that emerges is that an escalation of the conflict still leaves multiple …
Although we’ve become less confident the Bank of Japan (BoJ) will raise its policy rate again this year given its view of the risks to growth and inflation, for now we are sticking to our forecast that the 10-year JGB yield will rise to 1.75% by the end …
17th June 2025
