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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
With the S&P 500 at a new all-time high, its fall of more than 20% earlier this year already seems like a distant memory. However, we don’t think it’s really back to square one for US equities. For a start, equity indices tend to follow an upward trend. …
30th June 2025
Although the US dollar has tumbled as President Trump has ramped up the pressure on the Fed to cut rates, we don’t think investors are that concerned about the central bank’s independence yet. But the longer the attacks go on, the greater the pressure on …
27th June 2025
The Fed’s proposed loosening of supplementary leverage ratio (SLR) rules for big banks might help to improve demand for Treasuries, but we’re not yet persuaded it will outweigh the other headwinds facing the world’s largest bond market. Treasuries have …
26th June 2025
With the S&P 500 almost back at a record-high, we take stock of the different drivers of the US stock market’s recent (mis)fortunes. We suspect that the conditions will soon be back for equities in the US to lead those in the rest of the world. Four …
25th June 2025
The overnight announcement of a ceasefire between Israel/US and Iran has brought commodity and financial markets largely back to their pre-conflict square one. While tensions remain high and could easily re-ignite, our sense is that attention will now …
24th June 2025
US involvement in the Israel/Iran conflict has so far prompted just some volatility in global financial markets, with most major asset classes ultimately not far away from where they were on Friday. It’s easy, though, to see growing downside risks. …
23rd June 2025
In general, stock markets tend to be less affected by energy markets today than in the past. But the Israel-Iran conflict has already produced some interesting patterns in stock markets around the world amid a rise in energy prices. Much has been made of …
20th June 2025
We continue to think Treasury yields will rise, as the Fed stays on hold longer than investors expect. There was minimal market reaction on Wednesday (local time) to a cautious Fed : policy was left on hold, the statement was almost unchanged, and the …
19th June 2025
Fears that the US may get involved in the ongoing Israel-Iran conflict have led to another pick-up in oil prices and renewed jitters across financial markets. The impact so far remains limited, but as the conflict continues the risk of a more material …
18th June 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
Despite the further escalation in the Israel-Iran conflict over the weekend, the impact on major financial markets has remained relatively limited. Unless there is actual (not just feared) disruption to energy export infrastructure, the economic and …
16th June 2025
At the time of writing, global markets were in a “risk-off” mood after Israel’s strikes on Iran. We think there are three key initial points to make. First, as is almost always the case when Middle East tensions escalate, the key channel through which …
13th June 2025
President Trump’s latest tariff threats, combined with some softer US price and employment data, has sent the US dollar to its lowest level, in aggregate, in more than three years. There are still some factors that point to a near-term rebound, but that …
12th June 2025
Yet another downside US CPI surprise gave only a small boost to Treasuries, probably because tariff-driven price hikes still look imminent. That said, these price hikes look discounted in markets, so we don’t expect much upwards pressure on Treasury …
11th June 2025
US-China trade negotiations ongoing in London this week have the potential to have a bearing on financial markets, perhaps especially in China. We think there are two key questions to consider. First, how much of a boost could an eventual “deal” – or …
10th June 2025
With one month to go until the “pause” of the Trump administration’s “reciprocal tariffs” is, at least in principle, set to expire, market participants continue to take a pretty relaxed view of the risks around US trade policy. That probably makes sense, …
9th 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
While the ECB cut its policy rate today, as widely expected, President Lagarde’s accompanying comments tilted hawkish and have given interest rate expectations and the euro a boost. Our view remains that the ECB will deliver at least one more rate cut …
5th 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
Below-target inflation in the euro-zone and deflation in Switzerland bring back memories of the 2010s, but the drivers of low inflation are fundamentally different this time and we don’t see much scope for government bond yields to fall. Data released …
3rd 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
We’re cautiously optimistic about the prospects for China’s stock market over the rest of the year, despite the clear headwinds it faces. It’s not surprising that China’s equity markets have been among the most volatile globally over the past day or so , …
30th May 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
Despite all of the debt and deficit news out of the US, the spotlight in ultra-long bond markets has increasingly been focused on Japan. The surge in yields there last week seems to have sparked a global sell-off, and the subsequent plan from Japan’s …
28th 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
We think the yields of Japanese government bonds will continue to rise, but because of BoJ hikes rather than concerns about fiscal sustainability. Fragile bond market sentiment hasn’t been limited to the US lately: a sharp rise in yields in Japan has …
23rd 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
Debate over the end of US equity exceptionalism had quietened over the past month amid a historic rally, but with US assets selling off today debate may reignite. Our sense is that US stocks will hold up well against their peers over the rest of the year. …
21st May 2025
We see dimmer prospects for oil prices over the next year or so. But we think that will keep being a sideshow for US equity and bond markets. Admittedly, there has been a sizeable effect on the share prices of US energy companies in general, which is …
20th 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
There are still a few signs of stress in US financial markets. That’s despite this week’s ongoing rebound in the S&P 500, which has taken it well above its level on “Liberation Day”. It reflects the fact that investors have more to worry about than just …
16th May 2025
We think the recent “bear flattening” of the US Treasury yield curve has a bit further to run. The story in the Treasury market over the past few weeks has generally been one of bear flattening (short-end yields rising by more than long-end ones) as …
15th May 2025
The rolling back of tariffs has coincided with a recovery in big tech in the US and China. (See Chart 1.) Their dual rally is something new since Donald Trump returned to the White House. We think there’s a good chance it will continue, despite the US …
14th May 2025
Despite the US-China truce, we still think inflationary pressures will prompt the Fed to stay pat for a while yet. But we doubt the 10-year Treasury yield will rise much more from here, even though investors are still pricing in rate cuts. That’s because …
13th 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
Thanks to continued optimism over prospective trade deals to reduce US tariff rates, asset markets have generally recouped most of their losses after the 2 nd April tariff announcement. That said, we think that the boost from further trade negotiation …
9th May 2025
We still think investors are expecting too many Fed cuts over the remainder of this year, and our base case remains that Treasury yields will rise and the US dollar will strengthen. The Fed struck a very cautious tone in Wednesday’s policy statement, and …
8th May 2025
We expect government bonds in China to continue to perform well against a backdrop of looser monetary policy, but suspect its currency won’t depreciate as much against the greenback as we had previously envisaged. Meanwhile, we have mixed feelings about …
7th May 2025
We see a few reasons to be sceptical about the chances of a broad-based upwards revaluation of Asian currencies, despite recent moves. At the time of writing the breakneck rally in Asian currencies vs. the US dollar seemed to have come to a screaming …
6th May 2025
The stronger-than-expected April US Employment Report published today leaves us comfortable with our central scenario that the trade war won’t be enough to tip the US economy into recession. So, we think the Fed will keep its focus on inflation and stand …
2nd May 2025
Despite the Bank of Japan’s dovish tone today we think it won’t be long before JGB yields start to rise again. And even though concerns about Japanese capital repatriation have seemingly been back on investors’ minds lately, we don’t think higher JGB …
1st May 2025
We think the recent outperformance of euro-zone equities over US ones has run its course. The eight-day winning streak in the S&P 500 may break today, after the market opened down over 1% on news that the US economy unexpectedly contracted in Q1 , on …
30th April 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
Financial markets have staged a robust recovery over the past couple of weeks, even if they are for the most part not quite back to square one after the post-2 nd April turmoil. Given the ongoing uncertainty around US trade policy and the economic outlook …
28th April 2025
We suspect the US dollar will recover some lost ground over the coming months as its usual relationship with rate differentials reasserts itself. Seemingly dovish comments from Fed speakers, including Fed Governor Christopher Waller and Cleveland Fed …
25th April 2025
Despite further encouraging headlines on tariff reduction, a relief rally in Asian markets trading today has been notable by its absence. This reinforces our view that further gains in equity markets will become harder from here. Two stories broke on …
24th April 2025
Both US equities and government bonds have staged a relief rally over the past 24 hours, as concerns about Fed independence and the trade war have eased. But the fact that the rally was sparked largely by conciliatory remarks from US President Trump – …
23rd April 2025
Fears over the independence of the Fed can now be added to the growing list of things troubling investors. Market moves over the past couple of days shed some light on the likely market consequences of any attempt by President Trump to ouster Fed Chair …
22nd April 2025
Policymakers at the ECB appear to agree with us that risks to growth and inflation are increasingly skewed to the downside, supporting our view that the 10-year German Bund yield will stay around its current level and that the euro will give back some of …
17th April 2025
