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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
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
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
May’s Employment Report in the US ought to assuage concerns about the economy after some softer data earlier this week. But even if growth there holds up over the rest of the year, investors’ current outlook suggest there may be only limited upside for …
6th June 2025
We doubt Section 899 of the One Big Beautiful Bill that passed the House of Representatives in May will have the big negative effects on US asset markets that some seem to fear, even if it remains largely untouched in the Senate. To re-cap, Section 899 …
4th June 2025
To some extent, the persistent underperformance of US small-cap (SC) equities probably reflects lingering concerns about the effects of Donald Trump’s policies on the economy. But even if fears of a recession fade, we doubt US SC equities will fare better …
2nd June 2025
Despite a positive initial reaction in global stock markets to yesterday’s ruling by the US Court of International Trade (CIT), there is still plenty of uncertainty about future tariffs on US imports. So a really big boost to equities may not be on the …
29th May 2025
The 10-year Treasury term premium, as estimated by ACM , rose to a more-than-decade high of ~0.9% last week amid renewed concerns about US fiscal policy. But while the premium remains far below the ~4% it topped in the early 1990s, for example, we doubt …
27th May 2025
The passage of Donald Trump’s ‘one, big beautiful bill’ through the House of Representatives today has done little to calm nerves in the bond market, which had already been frayed by Moody’s recent decision to downgrade the US’ sovereign credit rating and …
22nd May 2025
The decision by Moody’s to downgrade the US government’s credit rating highlights that there are several potential storm clouds on the horizon for Treasuries, even if the downgrade itself doesn’t seem so far to have made much of a market splash. …
19th May 2025
Just over a month ago, we ditched our long-held forecast that the S&P 500 would end this year at 7,000 , and revised it all the way down to 5,500. While that looks like it might have been a mistake, we aren’t inclined to re-adopt such a positive view. We …
12th May 2025
The US stock market and the dollar have fared worse over the last hundred days than they fared during the first hundred days of all other presidential terms since 1980. What’s more, there has been an intervening rout in the Treasury market. It is hard to …
29th April 2025
China’s tit-for-tat retaliation in its rapidly escalating trade war with the US exerted some renewed pressure on equities and the dollar today, with bonds still buffeted by expectations of monetary easing and signs of market dislocation. Our base case …
11th April 2025
We think the turnaround in longer-dated Treasury yields has bit further to run, if – and it’s a big if – the worst is now over for the US stock market. One reason for the volte-face in bonds is second thoughts about the prospects for Fed policy after …
8th April 2025
Volatility in the US stock market hasn’t picked up sharply since Donald Trump returned to the White House, despite a very high degree of uncertainty about his economic policies. That may remain the case even after “Liberation Day”, judging by the …
2nd April 2025
Over the past month or so, economic data have generally surprised to the downside in the US, whereas they have done the opposite in the euro-zone. This may be one reason for the intervening shift in the performance of their stock markets. Admittedly, much …
24th March 2025
The prospect of looser fiscal policy in Germany isn’t the only significant reason MSCI’s Europe Index has outperformed its USA Index since Donald Trump returned to the White House. The ‘big-tech’ sectors’ fall from grace in the US has also been very …
21st 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
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
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
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 don’t think US equity market outperformance is over yet, despite the challenge from DeepSeek. The tone in US equity markets has turned more positive lately, with a modest gain on Thursday and futures pointing (at the time of writing) to another in …
31st January 2025
News that Chinese start-up DeepSeek’s AI Assistant has usurped US OpenAI’s ChatGPT as the most downloaded free app on Apple’s App Store has dealt the US stock market a blow today, just a week after Stargate was launched to much fanfare. Exports from the …
27th January 2025
Although developed market (DM) equities outside the US have purportedly benefited from bargain hunting recently, we doubt they will outperform their counterparts in the US over the course of 2025 as a whole. MSCI’s World ex USA Index of DM equities has …
23rd January 2025
Donald Trump’s ringing endorsement of Stargate is another shot in the arm for Artificial Intelligence (AI) in the early days of his second presidency, and supports our long-standing view that the S&P 500 will thrive in 2025 amid growing investment in, and …
22nd January 2025
It’s easy to forget the importance of earnings in influencing the S&P 500 when its performance is driven instead, as has been the case recently, by gyrations in the Treasury market. Earnings will be front of mind again tomorrow, though, when reporting …
14th January 2025
W e are sticking to our forecast that the S&P 500 will end next year at 7,000 , despite its slump since this week’s FOMC meeting. That’s even though we think Fed policy will be a bit less accommodative than we had previously projected , and the risk of a …
20th December 2024
The recent breakdown in the relationship between yen/dollar and the relative performance of stock markets in Japan and the US in local-currency (LC) terms makes it hard to predict how these stock markets will fare against one another if, as we envisage, …
13th December 2024
The Treasury market has been quite subdued since the US election, including today d espite a slightly disconcerting CPI report . We don’t expect it to become a whole lot more volatile in 2025 either, even allowing for concerns about the fiscal outlook. We …
11th December 2024
We aren’t convinced the outperformance of US small-cap (SC) equities since Donald Trump’s victory on 5 th November sets the tone for the first half of 2025. We doubt they will start to fare better than large-cap (LC) equities over a sustained period until …
26th November 2024
We don’t think the S&P 500’s AI tailwind has run out of puff yet, despite the seemingly lukewarm market reaction to Nvidia’s latest profit result. It’s tempting to see a warning sign for the broader market in the reaction to Nvidia’s latest profit …
21st November 2024
Although last week’s pull-back in the S&P 500 coincided with a big increase in the 10-year TIPS yield, we don’t think this marks the start of prolonged period of weakness in US equities driven by government bonds. Our view is that the S&P 500 will resume …
18th November 2024
We doubt the S&P 500 will come a cropper in 2025 even though the index fell in 2018 when Donald Trump began to wage a less ambitious trade war than the one he is planning now. Although the S&P 500 was struggling today at the time of writing, it had been …
12th November 2024
This early edition of the Capital Daily provides our first thoughts on the market reaction to the likelihood of a second Trump term. The US election has seen a stark shift to the Republican Party, with Trump claiming victory in the Presidential race and …
6th November 2024
Falling inflation across developed markets (DM) supports our view that policy rates will generally settle at their neutral levels, close to current market pricing in most DMs. That’s why we expect long-dated bond yields to stay near their current levels. …
16th October 2024
We doubt the gap between expected interest rates in the US and its trading partners will keep shrinking, given what’s priced into the money markets. That could potentially buoy the dollar in time, assuming the Fed shies away from slashing its policy rate …
17th September 2024
US households’ appetite for equities often depends on how confident they feel. Its strength in recent years is therefore rather surprising, given that their mood hasn’t been upbeat. Sentiment did perk up this month, judging by the University of Michigan’s …
13th September 2024
The adverse reaction in the stock market to today’s report on US consumer prices suggests inflation still matters to investors in equities, even if it has become a less important concern for them than economic growth over the past two months. Recall that …
11th September 2024
A disappointingly small rebound in the headline index of the US ISM manufacturing survey for August appears to have put some relative pressure on cyclical sectors of the S&P 500 today, which is down more than 1% the time of writing. The bigger picture, …
3rd September 2024
It’s perhaps surprising that financials have outperformed the S&P 500 during the recent bout of market turbulence . (See Chart 1.) After all, Treasury yields have fallen and the outlook for the US economy has darkened, both of which might have been …
27th August 2024
Nearly all of the pullback in the S&P 500 since the bout of rotation in the stock market began in the wake of June’s CPI report on 11 th July has now been reversed. Admittedly, the same cannot be said for the rotation itself. But we remain of the view …
20th August 2024
While a big reduction in speculative positioning against the Japanese currency may mean that future moves in global financial markets will be less extreme than recent ones, it doesn’t preclude more turbulence if, e.g., this week’s US data disappoint. Much …
12th August 2024
Today’s sell-off in the US stock market in the wake of a poor reception to yesterday’s results from the first two members of the ‘Magnificent 7’ to report during this earnings season is likely to have reassured those arguing we are in the early stages of …
24th July 2024
A recent surge in the Russell 2000 after the US CPI report for June was published last week has prompted claims that we are entering the initial stage of a secular rotation into US small-cap stocks. We are not convinced, for four reasons. First, what has …
17th July 2024
Despite the many twists and turns in bond markets this month amid mixed signals from central banks, most sovereign bonds in developed markets (DM) have rallied on net. We expect this to continue, with yields falling further in the coming months. The three …
20th June 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
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
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
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
