Our COVID Mobility Trackers indicate that activity weakened towards the end of Q4, and data up to mid-January suggest that it took another leg down at the start of 2021. With countries still in the early stages of their vaccination rollouts, we are …
18th January 2021
The rise in oil prices this year is likely to prove insufficient to remove strains in African oil producers’ balance sheets. Currencies in Nigeria and Angola will have to weaken further, and policymakers may turn to more desperate or draconian measures to …
Completions of new homes have made a full recovery from their collapse in Q2 2020, but builders appear more hesitant to start new projects. Given we expect the housing market to endure a rough patch later this year, that is unlikely to change anytime …
Although rental growth prospects for prime property are weak compared to recent years, the outlook is better than for secondary property. As such, we think that investors will continue to focus on prime assets this year, allowing prime office and …
The widening in India’s goods trade deficit to an 18-month high in December still has further to run, particularly as a recovery in both domestic demand and global oil prices pushes import values higher. That would be enough to tip India’s recent current …
We think that the surge in many agricultural commodity prices is somewhat overdone. Although ending stocks for the major grains and soybeans will be lower in the year ahead, they will still be relatively high by historical standards, which is why we …
15th January 2021
High-frequency data show that the surge in net inflows to EM bond and equity markets seen last month is now easing, but inflows remain strong. We think that will remain the case as global risk appetite continues to improve. The data provide signs that the …
Although Treasury inflation compensation – i.e. gaps between the nominal yields of conventional Treasuries and the real yields of TIPS with comparable maturities – has risen sharply since the spring, we don’t think this will prompt less accommodative …
Advanced economy headline inflation rates are set to jump by an average of nearly 2%-pts in the coming months as energy inflation picks up and, in some cases, the effects of last year’s temporary cuts in VAT cuts go into reverse. But with core inflation …
While we doubt that the US stock market’s current valuation will prevent it from making further gains, the fact that valuations are much lower in other parts of the world suggests to us that equities there could outperform over the coming years. Much …
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% today in a unanimous decision, and with signs that the latest virus outbreak is coming under control, further rate cuts seem unlikely this year. Korea’s third wave of the virus had …
Despite the new South African coronavirus variant, it appears that PGM production in the country will hold up well, for now, since the virus-containment measures are not as severe . The recent surge in new daily virus cases, in part caused by the latest, …
14th January 2021
We don’t think that there is a bubble in the US stock market. Yet even if we are wrong, it may inflate further before bursting given the outlook for the economy and monetary policy. To re-cap, one widely watched gauge of the US stock market’s valuation is …
The latest China trade data showed that commodity import volume growth eased back a little in December. But tailwinds from 2020’s stimulus should keep import volumes strong for a while yet . China’s exports climbed by 18.1% y/y in US dollar terms, …
Recent movements in the REIT market add weight to our view that structural factors, rather than cyclical ones, will determine the outlook for property markets over the coming years. In turn, irrespective of a successful vaccine rollout, the recovery in …
France’s tight restrictions are set to be in place for at least another month or two, so GDP will not recover strongly during Q1. However, although the slow start to the vaccine rollout poses a downside risk for 2021, we think the pace will pick up enough …
13th January 2021
Our working assumption is that the vaccine rollout proceeds fast enough for governments to start lifting restrictions in April and that the majority are lifted during May and June. This Update sets out these assumptions in more detail and discusses the …
Although Chinese equities have bounced back a bit so far in 2021, they have still underperformed those elsewhere since the news on vaccine efficacy in late 2020. We expect further underperformance this year. There was a stark contrast in the relative …
In this Update , we take a look at the key elections that are scheduled across the emerging world over the coming year and outline their implications for economic policy and growth . Table 1 gives a summary of the major elections taking place across the …
Egyptian inflation is likely to rise over the next 6-9 months due to stronger food and fuel inflation, as well as a weaker pound, which will prevent the central bank from resuming its easing cycle for much of this year. But a drop in inflation late this …
The latest lockdown will keep rental demand in London very weak and prolong the drop in rents there. There is no doubt that they will recover in the summer if vaccines are successful and the virus restrictions are eased, but we think that some of the …
After staging a stellar recovery in 2020, there is considerable momentum in metals prices as we embark on the new year. That said, while prices may rise further in the near term, we think that they will start to ease back in the second half of 2021 as …
Our GDP forecasts for this year sit some way above the rest of the market. The greatest risks to this upbeat view stem from unanticipated shifts in the virus and the fight against it, rather than the more orthodox macro events that typically derail …
Many commentators are arguing that firms will shift towards a “hub and spoke” model following the pandemic. But we think the arguments for this approach are not as strong as they first seem, and that other strategies will dominate in the years ahead. The …
12th January 2021
The plunge in small business optimism in December is mostly noise related to the election, but the clear signal from both the NFIB and JOLT surveys out today is that inflationary pressures appear to be building . The NFIB headline optimism index tends to …
If euro-zone households spent all of their forced savings from last year, it could provide a boost to GDP growth in 2021 of as much as 3%. In practice, we doubt that it will be anything like that large. Instead, we think that only some of these savings …
With the notable exception of oil, we are generally negative on the outlook for commodity prices this year. While oil should benefit from a vaccine-related revival in global transport activity, we expect that the prices of industrial metals and …
The shift towards orthodox policymaking at Turkey’s central bank has supported a rally in the lira and, so long as the policy shift sticks (as seems increasingly likely) and the external environment remains supportive, we think that the currency’s …
The decision by the Malaysian government to place the country under a two-week lockdown to slow the spread of the virus is likely to hit the economy hard. We are cutting our growth forecast for 2021 from 10% to 7%. We also now expect the central bank to …
We expect the prices of most energy commodities to rise in 2021, as demand revives in line with the global economic recovery. But coal prices are likely to fall back, as demand growth in major consuming regions drops back after the winter weather-related …
11th January 2021
While we have revised up our end-2021 forecasts for the Australian dollar and the New Zealand dollar against the US dollar to reflect the strength of their recent rallies, we still think that the Kiwi will outperform the Aussie over the next couple of …
Although several factors could conceivably support the dollar in the near term, we still think it will weaken overall this year as Fed policy remains accommodative and appetite for risk continues to grow. The first factor that could potentially drive the …
Government reform of leasehold will reduce payments from leaseholders to freehold landlords a lot in some instances. In this Update, we provide two examples of how the changes will affect “enfranchisement premia” – the cost of buying the freehold or …
After hitting a decade-low in 2020, we think that commercial property returns will turn positive in 2021, but any improvement is likely to be modest. This reflects the delayed recovery in the economy following tougher restrictions in Q1 and continued …
Our forecast is for a cumulative fall in Spanish prime office rents over the next two years. But we think this view is justified as occupier demand is likely to improve only gradually, meaning space released to the market won’t be fully absorbed. In fact, …
The risks to vaccination programmes fall into three groups: procurement, deployment, and effectiveness. In the coming few months, deployment issues will be a key limiting factor in most countries. These should be overcome relatively quickly in DMs, but …
8th January 2021
Despite the jump in US Treasury yields this week following the Georgia Senate run-off election results, we continue to think that the Fed will keep them from rising much further this year. The 10-year Treasury yield has risen above 1% for the first time …
The share of bank loans flowing to the property sector has doubled during the past 15 years. But new restrictions are likely to put an end to this upward trend. Coupled with broader limits on developer debt introduced last year, the scene is set for a …
We expect both the Swedish krona and the Norwegian krone to appreciate against the euro and the dollar in 2021. However, in contrast to 2020, we expect the NOK to outperform the SEK slightly this year. The fortunes of the Swedish krona and Norwegian krone …
7th January 2021
The Bank of England may not be ready to use negative interest rates until H2 2021. And by then, COVID-19 restrictions might be easing and the economy could be growing rapidly. In any case, if the Bank does loosen policy further, we suspect it will use …
While it’s still early days, the underwhelming start to vaccinations in mainland Europe lends support to our view that governments won’t lift most of the restrictions until May/June (see here ), and the uneven start suggests that some countries will make …
The pandemic has created fertile ground for populists to win presidential elections in Ecuador, Chile and Peru this year. That would have the biggest adverse market reaction in the former, and could lead to medium-term concerns about policymaking in the …
Compared to consensus, we are relatively downbeat on the outlook for home sales this year. Mortgage rates will stay close to record lows, but they will not fall further. Pent-up demand from last spring will soon be exhausted, inventory is at record lows …
Despite a brighter economic outlook later in 2021, many of the factors that weighed on investment activity last year are set to persist. In turn, following a likely 20% fall in European (excluding UK) investment in 2020, we think the recovery this year is …
