Filtered by Subscriptions: Bonds & Equities Use setting Bonds & Equities
The yield of 10-year Japanese government bonds (JGBs) is now almost where we forecast it to be at the end of the year. Admittedly, we doubt that the Bank of Japan (BoJ) will tighten policy as quickly as investors think in the next two years. But we …
28th May 2024
We doubt yesterday’s drop in the US equity market will prove a harbinger of further weakness to come – indeed, stocks have already rebounded today. But the unusual combination of a sizeable drop in the overall index even as one of its largest constituents …
24th May 2024
The sharp drop in frontier market sovereign dollar bond spreads this year has caught many by surprise. We think there’s a case that the bond rally may have gone too far in Argentina, Ecuador and Tunisia. But the decline in spreads in some frontiers, …
While the prospect of the Labour Party returning to government in the UK for the first time in 14 years might raise a few eyebrows in the financial markets, we wouldn’t put much store by the fact that some of its times in office since first forming a …
23rd May 2024
Corporate credit spreads have been near historical lows in recent weeks, and we think they will remain close to these levels in the coming months. The first two charts below illustrate how narrow the latest levels of US corporate credit spreads are …
Having underperformed most other EMs since the pandemic, we think that returns of financial assets in South Africa will continue to disappoint. The outlook would worsen if the African National Congress (ANC) ends up forming a coalition with radical …
While stronger-than-expected inflation data from the UK have led us to push back a bit our forecast for the start of the Bank of England’s easing cycle, we still project many more rate cuts than most anticipate. This feeds into our view that Gilt yields …
22nd May 2024
Despite the hawkish rhetoric from central bankers over the last few days, we still expect long-dated government bond yields in most developed markets (DM) to fall over the next year or so. 10-year government bond yields across DMs have generally been …
21st May 2024
The US dollar has been on the back foot amid the renewed rally in “risky” assets. While we think US stocks will soon re-establish the lead among global equities, we doubt US equity outperformance would benefit the dollar much. After reaching a …
20th May 2024
New measures to support China’s property sector have brought more cheer to Chinese equities. But, while we continue to think they will fare well in the coming months, we ultimately expect them to lose ground to stocks elsewhere over the next year or so. …
17th May 2024
Improving sentiment towards Chinese equities has sparked a further rebound over the past month, with stocks there having generally outperformed those elsewhere over this period. While we continue to see near-term upside, we think they will ultimately …
Although the “big-tech” sectors have been out of favour compared to others so far this quarter, we expect them to regain the lead before long and help the US stock market outperform those elsewhere. The S&P 500 reached a new all-time high yesterday, and …
16th May 2024
For much of the past year, the dollar has strengthened against emerging market (EM) currencies even as EM sovereign dollar bond spreads have narrowed. One way or another, that is unlikely to last. One relatively unusual feature of the strengthening of the …
This interactive dashboard allows you to explore our forecasts for equities and bonds through to end-2026. To explore what these forecasts imply for total returns from these assets, across a range of currencies, please visit our interactive Total Return …
Better news on US inflation over the past couple of days has provided further relief for bond and equity markets, and supports our forecast that Treasury yields will fall back a bit more over the coming months while the equity market scales new highs. …
15th May 2024
This note answers some of the most frequently asked questions that we received from clients during a recent online briefing about the latest US tariffs on China. Watch the original briefing here . What has been announced? Yesterday was the end of a …
Even if interest in ‘meme’ stocks rebounds following a renewed surge in GameStop’s share price, some of the telltale signs that a bubble in the broader stock market may be entering its final stages – such as excessive leverage – are absent. This suggests …
14th May 2024
While we expect government bond yields in most developed markets to fall back, we think that those in Japan will stabilise around their current levels. In turn, we anticipate that interest rate differentials will provide support to the yen. The yield of …
13th May 2024
The hawkish tone of Latin American central banks this week supports our view that loosening cycles in the region will proceed more gradually than many anticipate. But even so, we think most Latin American currencies will weaken by end-2024. This week’s …
10th May 2024
Although Japan’s equities and currency have generally moved in tandem in recent weeks, we think the historical inverse relationship between the two will reassert itself before long. We expect a stronger yen to become a headwind for Japan’s equities in the …
Policymakers at the Bank of England (BoE) are edging closer to easing policy, and we still think they will cut Bank Rate by more than widely anticipated. In turn, we expect this will weigh on Gilt yields and sterling. The muted market reaction to the Bank …
9th May 2024
We expect Japanese government bond (JGB) yields to rise a bit and the yen to come off the boil later this year, creating a headwind for equities there. The 10-year JGB yield has jumped 4bp and the TOPIX has dipped over 1% today following comments by Bank …
8th May 2024
The near-relentless narrowing in US credit spreads over the past year or so has left them at their lowest levels since late 2021. This echoes similarly upbeat pricing in the stock market. But, while we think that equities still have plenty of room to …
7th May 2024
Today’s favourable reaction in the US stock market to April's softer-than-expected Employment Report has coincided with renewed hopes of interest rate cuts, judging by the initial plunge in the 2-year Treasury yield towards 4.7%. (See Chart 1.) …
3rd May 2024
Despite the correction in equity markets over the past month, risk premia generally remain low across financial markets. While we expect this to continue as an AI-driven bubble inflates in equity markets, this Update explores four areas that could …
This week’s FOMC meeting supports our view that bond yields will fall back a bit further this year. Overall, financial markets took yesterday’s FOMC meeting and the following press conference as fairly dovish . Arguably, the key point in Chair Powell’s …
2nd May 2024
We doubt the recent rise in US bond yields will continue much further, or significantly undermine the prospects of US equities. The 10-year Treasury yield has fallen back a bit today ahead of the FOMC’s policy announcement, as the US Treasury’s Quarterly …
1st May 2024
While we expect Chinese bonds and equities to make more gains in the near term, w e think the outlook further ahead is not as bright for the latter. Chinese government bonds have been quite volatile in recent days. The 10-year yield recorded on Friday one …
30th April 2024
Japan’s apparent intervention in support of the beleaguered yen may buy some time for the currency to stabilise, but is unlikely to lead to sustained turnaround until US interest rate expectations start to fall back. While Ministry of Finance (MoF) …
29th April 2024
We think the Fed and most other developed markets (DM) central banks will be able to ease monetary policy this year and next more than investors currently anticipate. DM bond yields will end 2024 below their current levels, putting downward pressure on …
The NASDAQ 100 has shrugged off this week’s surge in real US Treasury yields amid a mixed bag of earnings reports from some of the ‘Magnificent 7’. (See Chart 1.) This suggests to us that the earlier pull-back in the index wasn’t a harbinger of a far …
26th April 2024
We think the recent recovery in the share prices of some of the ‘Magnificent 7’ is a sign that the earlier pull-back in their collective performance wasn’t a harbinger of a far bigger correction in the NASDAQ 100. On the contrary, we suspect that index …
The US dollar would have to appreciate a lot further before having significant effects on the global economy and financial system. A key risk to watch for is the widening policy divergence between the US and Asia leading to a major depreciation in the …
25th April 2024
Hikes are back on the agenda at some central banks and core PCE data for Q1 added to the hawkish mood in US markets. But we don’t think the Fed will feel the need to start hiking again. Indeed, given the path of underlying inflation, we continue to think …
Even if the US dollar stays strong against most currencies this year, we think that much of the broad-based weakness in EM (emerging market) FX has run its course. While some EM central banks may now slow their easing cycles, major shifts in policy are …
24th April 2024
We expect corporate bond yields in the UK and euro-zone to fall as rate cuts in those economies push down risk-free rates and strong risk sentiment narrows spreads further. In contrast to the weaker-than-expected PMI data out of the US today, PMIs for …
23rd April 2024
Stock markets are having a tough start to the quarter, but we think that they will rebound, notably in the US, thanks to renewed enthusiasm about artificial intelligence (AI). While they have bounced back a bit today, equities in the US and elsewhere have …
22nd April 2024
All nine constituents of the S&P 500 diversified banks index have now released their earnings reports for Q1. While the performance of their shares has typically been underwhelming of late, in some cases that can be only partly attributed to the lukewarm …
19th April 2024
Despite the ongoing surge in long-term government bond yields, the US yield curve remains inverted. As such, it is worth revisiting what the implications are for financial markets, and how this episode differs (or not) from previous curve inversions. As …
18th April 2024
The risk premia on Turkish assets are now low relative to the past decade or so. We think that will remain the case over the coming quarters, given the positive global risk-on attitude and the ongoing shift to traditional macroeconomic policy. Even so, …
We forecast that bond yields will fall back in most developed markets (DMs) over the next year or so, as central banks generally embark on bigger easing cycles than investors currently expect. But given our view that the Federal Reserve faces more hurdles …
Today’s UK CPI release has not made a sustained impact on investors’ expectations over the path of Bank Rate, and the market pricing implies that investors are still discounting fewer cuts from the Bank of England (BoE) than we are. This is why we expect …
17th April 2024
The correlation between changes in bond yields and in equities has rarely been so negative, and we suspect this will continue as yields fall back and equities rebound. When the Federal Reserve turned to monetary policy tightening in 2022, Treasury yields …
16th April 2024
Financial markets have, so far, taken the latest escalation in the Middle East over the weekend largely in stride. Our sense remains that, absent an even larger conflagration that disrupts energy supply chains, market participants will continue to focus …
15th April 2024
Inflationary pressures both domestically and in the US may keep government bond yields in emerging markets (EM) high for a while yet. But we think they will eventually fall later in the year. 10-year EM government bond yields have followed US Treasury …
12th April 2024
Today’s ECB policy announcement and press conference support our forecast for a June rate cut. Given that we expect more rate cuts than the money market discounts, we think that Bund yields will fall back towards 2.25% by the end of the year. Today’s …
11th April 2024
Despite yet another hotter-than-expected US CPI release, there are few signs in bond markets that long-term inflation expectations are de-anchoring. That supports our base case that US Treasury yields will fall back later this year, even if it also …
Today’s slump in S&P 500, following the release of a hotter-than-expected US CPI report for March, underscores the US stock market’s vulnerability to disappointing news on inflation. (See Chart 1.) Nonetheless, even though the pull-back was accompanied by …
10th April 2024
We think the price of gold will have eased back from current record highs by end-2024, but falling US Treasury yields and some softness in the US dollar will keep the price elevated. We had always expected the price of gold to fare well this year given …
9th April 2024
We expect Japanese equities to do quite well this year, as hype around artificial intelligence proves a more powerful catalyst than the headwind we anticipate from a stronger yen. Despite bouncing back a bit today, Japanese equities have fared poorly …
8th April 2024
