While we don’t think that risky assets are in a systemic bubble, we suspect there is limited scope for further large increases in valuations to drive their prices higher over the next few years . Despite the fall in equity markets this week, the …
9th July 2021
April’s data revealed that world trade flows have enjoyed virtually interrupted growth for 12 months now, with world trade remaining well above its pre-virus level. But between the quintupling of shipping costs over the past year, supply disruptions, and …
25th June 2021
Download the pdf for the full report . Given that the moves in most financial markets since the previous edition of our Long Run Returns Monitor have been fairly small–at least for the period as a whole –the returns that we are projecting from most assets …
24th June 2021
EM goods exports have surged in Q2. There are some early indications that EM exports will now come off their record highs, but they are still likely to stay at elevated levels throughout the rest of the year. Our measure of EM goods export values rose for …
Our China Activity Proxy (CAP) suggests that output remained strong in May but didn’t rise much further, with slowing credit growth weighing on construction and China’s pandemic-induced export boom showing signs of peaking. We think output will, at best, …
23rd June 2021
The latest data suggest that the Central European and some Asian economies will probably post strong GDP growth in Q2, but virus outbreaks have weighed on recoveries in India and parts of Latin America. High-frequency mobility data paint a mixed picture …
22nd June 2021
Growing political turmoil in Latin America over recent weeks has raised concerns about public debt, though vulnerabilities are most likely to crystallise over the medium term. Meanwhile, EM currency and banking sector risks are largely centred on Turkey, …
10th June 2021
The marked rise in government bond yields drove a deterioration in property valuations in Q1, particularly in industrial markets where property yields also fell steeply. (See Chart 1.) And with government bond yields edging up further in Q2, valuations …
2nd June 2021
Our China Activity Proxy (CAP) suggests that output rose further above its pre-virus trend last month thanks to the recent rebound in services and continued strength in industry and construction. We still think that activity will level off over the rest …
28th May 2021
Our monthly Long Run Returns Monitor provides an updated set of projections for the returns from major asset classes over the next few decades. Given that the period since the previous edition of this document has been a fairly quiet one for financial …
27th May 2021
EM exports are set to hit a new high in Q2, which will help to support economic growth, particularly in East Asia where virus cases are hitting domestic economies. While EM exports are likely to come off their current highs, they will probably stay at …
High-frequency data suggest that economies in Emerging Europe and parts of Latin America are over the worst of their latest virus outbreaks, but the worrying surge in virus cases in some Asian economies has hit activity. While more targeted restrictions, …
The further rise in real trade in March suggests that external demand continued to recover, even as capacity constraints related to shipping were intensifying. And while shipping costs have risen and delays worsened in the weeks since these data were …
26th May 2021
Following a sharp increase in Treasury yields, property valuations worsened for the second consecutive quarter in Q1. And we expect 10-Yr Treasury yields to resume their upward trend to reach 2.25% by end-2021, which will squeeze property valuations …
21st May 2021
After a marked rise in gilt yields and a fall in real estate yields, property looked relatively more expensive in Q1 than in Q4. Despite this, property sectors still look either undervalued or fairly valued on our measure, except for the industrial sector …
13th May 2021
The economic data for Q1 across many EMs look reasonably strong, but the latest COVID-19 outbreaks and the reintroduction of containment measures in some countries will weigh on underlying growth in Q2. The key exception is China, where activity should …
30th April 2021
Our China Activity Proxy (CAP) suggests that growth picked up last month as virus containment efforts were lifted. But this wasn’t enough to prevent a marked slowdown in q/q growth last quarter. With the export boom running out of road and the prop from …
26th April 2021
Download the pdf for the full report . Following their sharp rises earlier on in the year, government bond yields have steadied over the past few weeks. Perhaps reflecting this, both global equities and developed market (DM) REITs have generally rallied …
23rd April 2021
The blockage of the Suez Canal by the Ever Given container ship, which ran aground exactly one month ago, has had limited effects on shipping congestion and container freight rates worldwide. Meanwhile, data released today showed that world goods trade …
While the valuation of the MSCI Emerging Markets (EM) Latin America Index is now low both by past standards and on a relative basis, we think that further gains in the index will be driven mostly by expectations for strong earnings. To recap, the forward …
22nd April 2021
The broad-based improvement in EM goods trade balances over the past year is likely to unwind over the coming quarters as consumption patterns gradually normalise and oil prices recover further. But at the same time, a big build-up of external imbalances …
In our view, changes to the economic and policy outlook since the pandemic mean that corporate credit spreads in the US may remain lower than in their recent past for some time. Nonetheless, we see limited scope for them to fall much further from here. …
15th April 2021
The economic data out of the emerging world for Q1 look reasonably strong, but worsening COVID-19 outbreaks and a shift towards policy tightening are creating headwinds for some EMs. Activity in Central Europe, Brazil and the Philippines is already …
31st March 2021
Data from the CPB Netherlands Bureau suggested that world trade had shrugged off rising shipping costs up to January, with real goods trade rising by 2.5% m/m. The outlook is broadly positive. But if the grounding of the huge container ship in the Suez …
25th March 2021
EM exports have continued to rise sharply in recent months and this strength may persist for a little while yet. But the big tailwind to some of the Asian economies from strong demand for electronics will turn into a headwind in the coming quarters, which …
24th March 2021
Our China Activity Proxy (CAP) shows a surge in year-on-year growth at the start of 2021. But the picture is more mixed after accounting for favourable base effects. Buoyant foreign demand boosted industry but travel restrictions held back services …
With bond and equity dividend yields trending lower, valuations improved in Q4 for offices and retail, while they held steady for industrial. But in Q1, given the recent bond market rout, valuations are likely to deteriorate. (See Chart 1.) That said, the …
8th March 2021
In this first edition of the Long Run Returns Monitor we present an updated version of the projected returns from the major asset classes which feature in our annual Long Run Asset Allocation Outlook. The full report can be accessed by clicking on the …
5th March 2021
While further market turmoil is a risk over the coming quarters, the likelihood of outright banking, sovereign debt and currency crises among the large EMs is low. More acute vulnerabilities lie in some of the smaller frontier markets. Regular readers …
A global shortage of semiconductors is disrupting auto production, and – among EMs – it could hit exports from Central Europe and Mexico in particular. But some of the lost revenue should be made up once shortages ease. Meanwhile, strong semiconductor …
26th February 2021
On the back of rising Treasury yields, property valuations took their first hit in eight quarters during Q4. And, with Treasury yields climbing higher since, it is likely that valuation scores will fall further in Q1. Despite valuation scores declining in …
While the latest signs are that capacity constraints in global shipping are continuing to bite, we expect these to subside over the course of the year. Indeed, as vaccine rollouts allow economies to reopen, the pace of the recovery in goods trade should …
The outlook for emerging markets has improved in recent weeks, but we still expect a relatively slow and bumpy economic recovery over the next 12-18 months. The raft of Q4 GDP data released so far have been encouraging . Despite tighter social distancing …
24th February 2021
Please see PDF for full publication Property valuations improved in Q4, after they stabilised in the previous quarter. This was largely on the back of the vaccine announcements, which drove a recovery in equity prices and lowered dividend yields. As a …
9th February 2021
While we expect a swift recovery in developed economies over the course of this year, we doubt that this will come alongside a boom in EM goods exports. Instead, as global consumption patterns start to normalise, the key story over the next year or so …
29th January 2021
High COVID-19 cases across parts of the emerging world have grabbed headlines over the past few months. But while these outbreaks will inevitably create bumpiness in the affected countries’ economic recoveries, large downturns should be avoided. The …
28th January 2021
Another increase in world trade in November meant that it exceeded its pre-pandemic level, though exports remained depressed in the US and emerging Europe. Since November, container freight rates have surged, reflecting shipping supply struggling to cope …
26th January 2021
Our China Activity Proxy (CAP) suggests that growth softened slightly at the end of 2020 but remained strong on the back of a further improvement in services. Domestic consumption should continue to pick-up this year as foreign demand drops back and …
22nd January 2021
The latest activity data continue to show a divergence across countries, but also sectors. Consumers have generally driven recoveries in parts of Latin America, while manufacturing has been the main area of strength in much of Emerging Asia and Emerging …
21st December 2020
Our China Activity Proxy (CAP) suggests that growth remained robust last month thanks to a further pick-up in services and continued strength in construction and exports. We expect growth to remain above-trend for a while even as policy support is …
One striking observation from the latest EM goods trade data is that exports have continued to rebound faster than imports, causing trade positions to improve further. While some of these gains may endure, various factors that have boosted EM trade …
11th December 2020
Positive vaccine developments have diminished, but not dispelled, financial risks in emerging markets. Brazil and South Africa are still facing slow-burning fiscal crises, while India’s banking sector looks worryingly frail. Elsewhere, despite the recent …
3rd December 2020
While world GDP was probably still about 3% short of its end-2019 level at the end of Q3, world trade had recovered to 1.5% below its pre-virus peak. As long as industry remains relatively unscathed by renewed restrictions in Europe and the US, trade …
30th November 2020
Falls in alternative asset yields in Q3 meant valuations continued to improve for offices and retail, while they held steady for industrial. (See Chart 1.) And the backdrop is supportive of property valuations in the coming quarters. Indeed, government …
The latest activity and mobility data are consistent with economies in Latin America, India and South Africa registering another quarter of positive growth in Q4, and those in Central & Eastern Europe (CEE) suffering renewed contractions. But we still …
27th November 2020
Property valuations improved for the seventh consecutive quarter in Q3, following another sharp fall in equities earnings yields. But this was the smallest rise in valuation scores this year and changes so far in Q4 point to a partial reversal. (See Chart …
24th November 2020
Our China Activity Proxy (CAP) suggests that growth continued to accelerate last month as service sector activity returned to its pre-virus path, while strong construction and exports continued to boost industry. On our estimates, China’s economy is now …
19th November 2020
An effective vaccine rolled over the course of 2021-22 would probably result in weaker demand for COVID-19 related products and some consumer goods, removing a tailwind to exporters in parts of Asia and Central & Eastern Europe. Meanwhile, higher …
12th November 2020
Property valuations stabilised in Q3, on the back of a marked improvement in Q2. This meant that, apart from industrial, all sectors looked either undervalued or fairly valued by our measure. However, with income streams highly uncertain in the near term, …
11th November 2020
While equity markets have fallen sharply over the past two weeks amid worries about the resurgence of new coronavirus cases in Europe and the US, there is little sign of the widespread market dislocations that accompanied the global spread of the pandemic …
2nd November 2020
