There is growing evidence that weakening demand in major economies is taking a toll on world trade. While trade volumes rose in August, early reporting Asian economies revealed a decline in imports in September, exports orders have fallen sharply across …
26th October 2022
As the recent breakdown of the UK Gilt market illustrates, policymakers face an increasingly difficult trade-off between combating inflation, supporting economic growth and maintaining financial stability. With core bond and currency markets facing very …
Our China Activity Proxy (CAP) suggests that output declined in September by the most since the Omicron wave. The main culprit – renewed disruption from virus curbs – appears to have worsened further this month. We think the economy will contract this …
25th October 2022
While the latest change of plans by the UK government takes, in our view, a lot of the upside risk out of Gilt yields, we suspect stubborn risk premia remain that may take some time to fade completely. The latest U-turn in UK fiscal policy seems to have …
18th October 2022
While world trade was resilient in the first half of this year, there is growing evidence that it has since weakened, and we suspect that it will contract outright in 2023 as the world economy falls into recession. Weaker demand for traded goods and …
28th September 2022
Our China Activity Proxy (CAP) suggests that virus disruption and cooling exports caused the economy to stagnate in August. September was likely worse and there is little upside in the near-term. The CAP is our attempt to track the pace of growth in …
Tighter global monetary policy and the strength of the US dollar continue to punish a number of frontier markets with weak sovereign balance sheets. Meanwhile, worries about Turkey’s balance of payments position remain acute, and external risks are …
5th September 2022
Despite a stabilisation in property yields, valuation scores fell again in Q2 on the back of further rises in alternative asset yields. Apartment and industrial pricing look most stretched, but also offer the best rental upside for investors. That …
26th August 2022
World trade was broadly unchanged at a high level in June, and timelier data suggest that the continued easing of supply constraints in China helped lift exports in Asia in July. But forward-looking indicators suggest that global demand for goods …
Our China Activity Proxy (CAP) suggests that the economic rebound following the hit from lockdowns had petered out in July. And despite increased policy support, growing headwinds will continue to weigh on the economy during the remainder of the …
22nd August 2022
Download the PDF for the full report Our Long Run Returns Monitor provides our updated long-term projected returns for major asset classes, as well as a summary of the macroeconomic forecasts which underpin them. All projections in this publication are as …
12th August 2022
Commercial property valuations worsened for the sixth quarter in a row in Q2, and for all-property is now the most overvalued since late 2007. But since the end of June gilt yields have edged back and we doubt they will match their previous peak over the …
11th August 2022
We estimate that, in aggregate, the US dollar has become more overvalued over the past few months. (See Chart 1.) In our view, this is because fundamentals in the US relative to other major economies have not improved to the same extent that the greenback …
29th July 2022
A sharp rebound in Chinese exports helped lift world trade higher in May, and could boost trade further in the coming months. But outside of China, forward-looking indicators still suggest that weaker global demand will weigh on trade, meaning that …
27th July 2022
Our China Activity Proxy (CAP) suggests that the economic hit from lockdowns had largely reversed in June. But infection numbers are ticking up again. And even if another large-scale virus wave is avoided, problems in the property sector and headwinds to …
21st July 2022
The valuations of euro-zone assets are now very low relative to those in the US, but we don’t think that’s a reason to expect the former to outperform the latter any time soon. The valuation of euro-zone assets has continued to fall over the past few …
15th July 2022
Official data showed that world trade rose slightly in April and limited data for May suggest that it probably rose further as disruptions from lockdowns in China eased. But weaker global final demand for goods, due to a gradual normalisation in spending …
28th June 2022
Our China Activity Proxy (CAP) suggests that around half of the drop in output during the recent virus wave reversed in May. This recovery looks to have continued in June. But a lot of damage has already been done and we now doubt that China’s economy …
22nd June 2022
Higher alternative asset yields drove a sharp deterioration in European property valuations in Q1. (See Chart 1.) Valuation scores declined across all sectors, though retail remained in fair value territory. With the surge in bond yields continuing into …
9th June 2022
The effects of the war in Ukraine and strong dollar are causing sovereign debt risks to build in a handful of frontier markets with weak balance sheets, while public debt dynamics in parts of Emerging Europe also look increasingly concerning. Meanwhile, …
7th June 2022
There was a huge deterioration in property valuations in Q1, reflecting the sharp rises in alternative asset yields recorded since the start of the year. The size of those yield rises mostly dwarfed the differences in property yield changes across sectors …
31st May 2022
After a growth spurt late last year, world trade flatlined in Q1. The Ukraine war and lockdowns in China raised concerns that renewed supply bottlenecks would choke up world trade. However, notwithstanding the reported surge in US imports in March, it …
27th May 2022
Recently-released Q1 GDP figures showed that most EMs performed well at the start of this year, but headwinds are growing. Lockdowns are dealing a heavy blow to China’s economy and spillovers from the war in Ukraine will weigh on Emerging Europe in …
26th May 2022
Our China Activity Proxy (CAP) suggests that all of China’s pandemic-era growth has been reversed by recent lockdowns, with output in April no higher than during 2019. Activity should start to rebound this month on the back of easing restrictions. But the …
So far, the sell-off across bond and equity markets this year has not triggered major signs of systemic risk. If that were to change, central banks would probably have to step in to prevent a destabilising cycle of panic selling and money market distress …
20th May 2022
12th May 2022
Commercial property valuations worsened further in Q1 and now look overvalued. The spread between property and gilt yields narrowed to its lowest level post-GFC, but still has some distance to fall to reach the lows of 2007. With more interest rate hikes …
10th May 2022
Our China Activity Proxy (CAP) suggests that lockdowns in Jilin and Shenzhen triggered an outright contraction in the economy in March, even before restrictions were tightened in Shanghai and disruption to domestic freight traffic intensified this month. …
27th April 2022
While official data showed that world trade held up well in February, timelier national indicators suggest that exports from some Asian economies have fallen since then. This slowdown seems to reflect weaker global consumer demand, which we expect to …
26th April 2022
Many EMs have started the year on a solid footing, but challenging months lie ahead. While high inflation is likely to weigh on consumption, spillovers from lockdowns in China and the war in Ukraine are likely to exacerbate supply shortages and hamper …
25th April 2022
We don’t expect ongoing tightening by the Federal Reserve will see the valuations of emerging market (EM) equities or bonds plunge, even if they are unlikely to rebound much either. Sharp rises in bond yields in developed markets this year – amid …
21st April 2022
We suspect the sectors of the equity market where valuations are the lowest will continue to weather the storm of rising bond yields a bit better than others. We highlighted in our previous DM Valuations Monitor how rising bond yields were taking a toll …
12th April 2022
The latest available official data suggest that world trade held onto gains from Q4 in January, and timely indicators suggest that it may have edged up in February. It will be May before we have comprehensive official data on the hit to trade activity in …
29th March 2022
We estimate that, on balance, the US dollar’s “fair value” has risen alongside an appreciation of the greenback against most major currencies. This increase in fair value largely reflects the relative strength of the economic recovery in the US as well as …
25th March 2022
Activity in large parts of the emerging world has rebounded following the easing of Omicron waves, but the war in Ukraine has caused the growth outlook for most EMs to worsen again. While commodity producers across the Gulf and parts of Latin America …
24th March 2022
Our China Activity Proxy (CAP) suggests that the economy started the year on a stronger footing than it ended 2021. But these gains are already being derailed by China’s worst virus outbreak since Wuhan. The CAP is our attempt to track the pace of growth …
22nd March 2022
Financial markets in Central Europe have been hit hard by the contagion from the war in Ukraine, but spill-overs to other EMs have been limited so far. If the war were to result in a sustained period of risk aversion and capital outflows, this could cause …
10th March 2022
While Russia’s financial markets have unravelled since the country’s invasion of Ukraine, global markets have so far held up relatively well. But the mood seems to have turned a bit in recent days, and there are now some early signs of financial stress …
3rd March 2022
The latest trade data suggest that the Omicron wave caused limited disruption at the turn of the year. And, for now, it looks like the impact of the Russia-Ukraine war on world trade will be small in aggregate. But the hit would become much larger if …
1st March 2022
Higher government bond yields and falls in property yields across all sectors contributed to a deterioration in European property valuations in Q4. (See Chart 1.) While most industrial markets now look overvalued, for now we think that this is justified …
There was little change to property valuations in Q4, with two major exceptions. Those were the industrial sector, which saw another decline in its valuation score, and a handful of Southern apartment markets, which dropped into the overvalued range. Both …
25th February 2022
Large Omicron waves have caused activity to weaken in many EMs in Q1, but the good news is that mobility appears to bounce back quickly once outbreaks subside. As a result, the economic hit is likely to be small and short-lived. Instead, high inflation …
22nd February 2022
Property valuations, compared to bonds and equities, deteriorated for a fourth consecutive quarter in Q4. The spread between the asset classes narrowed as the magnitude of the fall in all-property yields outweighed marginal downward moves in gilt and …
9th February 2022
Emerging market (EM) equities’ relatively low valuations may continue to hold them in better stead than equities in the US, but we think they will do less well compared to other developed market (DM) equities. One striking feature of January’s falls in …
1st February 2022
The latest activity figures suggest that the EM recovery held up reasonably well at the end of last year, although China’s economy was struggling for momentum. While Omicron virus waves are likely to dampen activity this quarter, the impact will probably …
27th January 2022
After gradually trending lower for much of last year, November marked the second consecutive month of strong growth in world trade, which reached a new record high. This adds to evidence that some product shortages began to ease towards the end of 2021. …
26th January 2022
Our China Activity Proxy (CAP) suggests that China’s economy was still struggling to regain momentum at the end of last year amid troubles in the property sector and recurrent COVID outbreaks which continue to depress service sector activity. We think …
24th January 2022
China’s economy started 2021 above its pre-pandemic path of output, thanks to stimulus and surging global export demand. Our China Activity Proxy (CAP) suggests that the economy is ending the year well below the pre-pandemic path as a boom in construction …
20th December 2021
The recent rally in the US dollar has been driven by strong economic fundamentals in the US relative to other major economies and a favourable shift in yield differentials, leaving the greenback only a bit above our estimates of “fair” value. We expect …
17th December 2021
The recovery from the crisis over the course of this year has been uneven, with strong retail spending and industrial output setting the stage for a sharp rebound in the likes of Chile, Colombia and Poland, while recoveries in South Africa and Brazil have …
15th December 2021