Filtered by Subscriptions: Asset Allocation Use setting Asset Allocation
The US government losing another one of its “AAA” ratings after Fitch Ratings’ downgrade decision Wednesday is more symbol than substance. But three key related points are worth highlighting. First, the market reaction differs significantly from that of …
4th August 2023
The French stock market’s strong showing since 2018 appears to have been built on solid ground. But French equities have stopped outperforming their German peers this year, and the bar is quite high for them to start doing so again. French and German …
3rd August 2023
We think El Ni ño poses downside risks to the prices of emerging market assets, in general. But even if the effect in aggregate wasn’t all that large, there are several vulnerable sectors where such an event could create some relative winners and …
The sky-high valuations of some touted winners from AI have given rise to claims that their share prices have risen to unsustainably high levels. Is there anything we can learn from the dot com era? The best-performing stock in the S&P 500 in the …
26th July 2023
China’s stock market has underperformed over recent months and investors once again seem to be discounting a lot of bad news. We think this pessimism is slightly overdone and that Chinese equities will fare better than those elsewhere over the rest of …
21st July 2023
Given our view that economic growth will disappoint, we doubt that the positive mood accompanying US banks’ earnings reports will endure over the rest of 2023. But when the outlook brightens, we suspect that bank stocks will recover, helped by lower but …
June’s soft US CPI print seems to have given investors renewed hope that inflation could fall back to normal levels without the economy slowing too much, if at all. We continue to think that the chance of a more-significant economic slowdown is …
13th July 2023
Not so long ago, a higher 10-year TIPS yield almost invariably meant an underperformance of US “growth” stocks vis-à-vis their “value” peers, a lower gold price, and a stronger dollar. That’s changed in 2023, though, with the relationships weakening …
Given our view that a big stock market rally fuelled by enthusiasm about AI is on the way, we expect equities in some IT and industrials subsectors to outperform, which would favour the US market. Equities in the US have fared markedly better than those …
12th July 2023
We still think the yields of long-dated sovereign bonds in Canada, Australia and New Zealand will fall by the end of this year, but no longer expect them to do so by much more than the yields of bonds elsewhere. Canada, Australia and New Zealand have led …
7th July 2023
Although we expect emerging market (EM) policy rates to fall vis-a-vis the US this year, we don’t expect EM local-currency sovereign bonds to outperform US Treasuries until global growth picks up over 2024. EM central banks have generally shifted into …
5th July 2023
Reconciling the slide in Japan’s currency with big flows into its stock market from abroad and a perception that the appeal of foreign bonds to Japanese investors has waned in response to high hedging costs is easier to do once securities transactions …
30th June 2023
Since bottoming out late last year, European and US equities have fared comparably in local-currency terms, and European stocks have even outperformed in dollar terms. Looking ahead, however, we think that the lack of AI (or indeed tech) “champions” in …
20th June 2023
We don’t think growing enthusiasm about AI will be enough to stop the S&P 500 from declining if, as we expect, the US economy falls into recession later this year. Nonetheless, we now think the index will end this year a bit higher than we’d previously …
We now suspect growing euphoria over AI will drive the S&P 500 to a significantly higher level than we had previously forecast by the end of next year. In the meantime, though, we still think a mild economic downturn may take some heat out of the stock …
16th June 2023
Although we no longer expect Gilts to outperform in local-currency terms, we do think they’re set to hold up better against Treasuries and Bunds over the rest of this year than they have done lately. Gilts have seen a renewed sell-off lately. The 10-year …
15th June 2023
Although we think that the Fed is set to end its tightening cycle in July, we aren’t convinced that 10-year Treasuries will outperform 2-year Treasuries in the way that they have after recent Fed tightening cycles. We expect the Fed to wrap up its …
9th June 2023
Although a lot of bad news now appears to be priced into US equity office REITS, the sector still faces significant challenges. This suggests to us that a material improvement in its fortunes is not likely soon. US equity REITs in aggregate have …
8th June 2023
In a recent Global Markets Update , we analysed the remarkably narrow rally in the S&P 500 so far in 2023. We concluded that recent history supported our forecast that the rally will run out of steam before long, albeit with the largest firms potentially …
2nd June 2023
We don’t think that the recent strong gains in Japan’s equity market mark the start of a significant reversal of its decades-long underperformance; we expect it to lag other markets over the rest of this year in local-currency terms and to perform broadly …
1st June 2023
Perhaps the most remarkable feature of this year’s rally in US equities is just how narrow it has been. We think history suggests that this bodes poorly for the S&P 500’s prospects over the rest of this year. While the S&P 500 has returned ~9% in the year …
24th May 2023
Emerging market equities have typically outperformed their developed market counterparts after US recessions. While we don’t foresee them replicating the sort of outperformance seen after the early-1990s or early-2000s recessions, we do think the MSCI …
19th May 2023
We think that investors are underestimating the scale of interest rate cuts in the UK next year. If we’re correct, that could propel Gilts to the top of the class for local-currency returns over the rest of 2023. Local-currency returns from ICE BofA’s …
12th May 2023
We don’t think long-dated Treasuries are bound to fare worse than the S&P 500 in the coming weeks, even as the risk of US sovereign default looms larger. Our US Economics Service is the place to look for detail on the evolving debt ceiling spat, which …
11th May 2023
With China’s economic rebound losing momentum and investors’ attention shifting back to concerns about the country’s political and economic model we think the near-term prospects for Chinese equities have become less bright. We now envisage the MSCI …
10th May 2023
The underperformance of the US stock market seen last year has generally paused so far in 2023, as returns have been propped up by mega-cap “growth” stocks. That may continue over the rest of the year, especially if advanced economies enter recessions. …
4th May 2023
In our view, the role of UK pension funds in deterring firms from listing on the London Stock Exchange has been overstated of late. To the extent that higher valuations are the reason firms find a US listing more attractive, we think there is good reason …
28th April 2023
Resilience in much of the global economic data of late has raised questions over whether the recessions we expect in most developed markets (DMs) will materialise later than we had initially thought. As such, we now forecast most “risky” assets will reach …
27th April 2023
We would not be surprised if US “growth” stocks outperformed their “value” peers by a bit more in the near term. But we still suspect that growth will underperform value substantially over the longer term. That is informed by our view that the valuation …
21st April 2023
While US equity REITs are a long way from discounting the “best of times” for US commercial real estate (CRE) over the coming quarters, listed real estate stocks in Europe appear braced for something not far off the “worst of times”. That is a difference …
17th April 2023
Financial market strains have eased over recent weeks, though some pockets of uncertainty remain and our sense is that the risk of further problems emerging in the coming months remains high. Since the forced takeover of Credit Suisse by rival UBS three …
14th April 2023
The UK stock market has been caught in the crossfire of recent sectoral trends in global equities, leading to a period of underperformance over the past month. Despite tentative signs of that going into reverse, we doubt that the MSCI UK Index will …
6th April 2023
We anticipate that the S&P 500 will fall back later in 2023, largely because analysts are far from pricing in a recession in the US that we think is even more likely after the recent banking turmoil. Our forecast is that the index will reach a trough of …
Needless to say, economic downturns are usually bad news for US banks’ share prices. But banks haven’t always underperformed the overall stock market in a recession – even when there has been a banking crisis! That could conceivably be the case again this …
24th March 2023
Although recent strains in the banking sector mean that the economic outlook is especially uncertain, in our view equities are unlikely to perform particularly well, regardless of how things play out. It goes without saying that, over the past year or so, …
22nd March 2023
While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of whether more financial institutions run into trouble, …
20th March 2023
While the backdrop has shifted dramatically, we still think there’s a strong case for our existing forecasts of a further rally in long-dated bonds by the end of the year, and some near-term strength in the US dollar and weakness in equities. The Swiss …
17th March 2023
The ghosts of 2008 have made a sudden reappearance. Many metrics of core market functioning have worsened worryingly fast, but the overall situation is still long way short of the type of strains seen during the worst parts of the Global Financial …
16th March 2023
The US may not have a monarchy, but cash has arguably become its proverbial king of investments. If history is a guide, it is a reign that is likely to feature equities underperforming bonds amid a recession. Last November, the yield of a 3-month Treasury …
9th March 2023
Fed Chair Powell’s testimony to Congress has prompted a material revision to our forecast for the path of the fed funds rate and suggests the near-term risks to that forecast are skewed to the upside. This Update sets out some of the likely implications …
8th March 2023
Although recent economic data have surprised to the upside, we still think that economic growth in the US will falter later this year. In our view, indicators of the equity risk premium in the US point to some complacency regarding the economic outlook, …
3rd March 2023
With much of the global economy holding up surprisingly well and inflation not coming down as quickly as expected, investors are weighing up the risk that policy rates remain elevated for much longer than previously thought. This Update discusses what …
We think the recent outperformance of the US “big-tech” “super-sector” could continue, but not because of the “bargain hunting” that we think has caused it to occur despite higher real Treasury yields . The rise of more than 30bp in the 10-year TIPS yield …
23rd February 2023
While more disinflation may yet benefit the US stock market by, for example, facilitating a renewed decline in TIPS yields and boosting profits from the rest of the world if accompanied by a weaker dollar, we don’t think it will prevent equities from …
17th February 2023
A plunge in credit spreads in recent months suggests to us that there is now limited scope for corporate bonds to outperform government bonds over the next couple of years, even if the global economy holds up relatively well. And if we are right about …
10th February 2023
We doubt the recent renewed outperformance of the “big-tech” sectors of the US stock market will continue in the coming months given the prospect of a mild recession, even if TIPS yields fall again. Despite some disappointing news on the earnings front, …
9th February 2023
The Adani saga hasn’t done much to reduce the comparatively stretched valuation of India’s stock market. In our view, that means there is still scope for it to underperform over the long run. India’s stock market generally avoided the sell-offs seen in …
Despite some better news recently, we still think that advanced economies face a tough couple of quarters, an outturn which does not seem to be fully discounted in financial markets. With this in mind, our view remains that risky assets in general will …
3rd February 2023
Our view that the stock market in China will continue to recover in the coming months even as its counterpart in the US falters ahead of a mild recession there raises the question of how equities elsewhere would fare. This Update attempts to shed some …
2nd February 2023
While a “risk-off” period in markets may prompt it to pause in the near term, we expect the recent pattern of the US dollar retreating as non-US equities outperform to set the tone for the next couple of years. One major recent theme in global markets has …
27th January 2023