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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
Recent gains in the US stock market have been unusually narrow, and we don’t think the conditions are yet in place for a broad-based rally. A striking fact about the recent gains in US equities is that they have been driven by a remarkably small number of …
31st May 2023
President Erdogan looks set to secure victory in the second round of Turkey’s presidential election on 28 th May. This Update sets out how we think this would play out in Turkey’s financial markets this year: in short, we think that measures of Turkey’s …
25th May 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
Although monetary tightening has been a drag on equities over the past year or so, we don’t think the end of rate hikes means the stock market is set for big gains. Rate hikes among developed markets look to be drawing to a close . In particular, we think …
19th May 2023
While banking sector strains have become less acute over recent weeks, core money markets remain tense as uncertainty grows around the potential fallout from even a temporary default on US Treasuries. Despite the recent failure of First Republic and …
18th May 2023
Any impact of QT has so far been modest and swamped by the effects of higher policy rates. Asset disposals might put some upward pressure on yields in the euro-zone in the near term, but the process of balance sheet normalisation will be slow and in some …
Click here to read the full report . This revamped Global Markets Valuations Monitor combines and replaces our previous DM Valuations Monitor and EM Valuations Monito r publications. … Markets Valuations Monitor (May …
12th May 2023
Sovereign debt risks are back in focus as some frontiers appear to be drifting closer to default. We remain most concerned about default risks in Tunisia and Pakistan, particularly in light of this week’s unrest and IMF deals now appear further away. Debt …
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
We forecast small further falls in the yields of long-dated US Treasuries and euro-zone sovereign bonds between now and the end of next year, as disinflation picks up steam and central banks turn more dovish. Investors largely shrugged off this week’s …
4th May 2023
Click here to read the full report. We think the economic recovery in China will support further gains in the country’s equity market. Despite some renewed evidence that China’s economy has been recovering more strongly than most anticipated in the first …
3rd May 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 think disappointing global growth will be a headwind for “risky” assets in developed markets (DMs) during the second half of this year. So far, this month has been a tale of two halves . Over the first part of the month, investors looked like they were …
We think euro-zone equities will struggle as the region’s economy weakens more than investors expect. Euro-zone equities have continued their strong year-to-date gains this month, with the short-lived dip on the back of the banking turmoil now fully …
19th April 2023
We think investors’ expectations for the Fed funds rate will fall a little by the end of this year, which will push the 10-year Treasury yield a bit lower by end-2023. But we doubt lower “risk-free” rates would be enough to prevent a sharp drop in the S&P …
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
Although equity and oil prices are usually positively correlated, we think equities will struggle in the next few months and that oil prices will end this year somewhat higher than they are now. We also expect a rebound in equities across the board in …
13th 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 …
6th April 2023
The recent turmoil in the global banking sector have sent ripples through financial markets. So far, a full-blown financial crisis doesn’t seem likely to us, although clearly any escalation would add to risky assets’ worries. But even if that is avoided, …
31st March 2023
With the dust settling on the recent turmoil in US and European banks, economists from across our financial markets coverage assessed the damage to the outlook for bonds, equities and FX. Chief Markets Economist John Higgins and the team held an online …
30th March 2023
There has been a rise in risk premia in the bond market since the start of the banking sector turmoil. But we think impending recessions will push corporate credit spreads up further from here. Global financial markets have seen a repricing of risk across …
24th March 2023
Even if the banking sector turmoil doesn’t grow into a broader economic crisis, we still think equities in emerging markets (EMs) will struggle over the next couple of quarters in local-currency (LC) terms. Since confidence in the financial sector started …
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
US banks’ problems may have only just begun, but we doubt a Global Financial Crisis 2.0 is on the cards. As is well known by now, last year’s surge in bond yields, stemming from a dramatic increase in interest rates, caused US commercial banks to rack …
17th 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 …
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 Fed is clearly trying to avoid a premature easing in financial conditions and a repeat of 1970s-style “stop-go” monetary policy. This Update discusses some lessons from that period for equity markets today. Equities have struggled over this week, …
9th March 2023
We think MSCI’s India Index will fall over the next couple of quarters in local-currency (LC) terms, amid subdued domestic economic activity and a general deterioration in investors’ appetite for “risky” assets. While it was among the best performers in …
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
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 …
3rd March 2023
We think even if some of the recent headwinds that have buffeted emerging market (EM) assets fade, a slowdown in global growth might keep them under pressure in the near term. EM assets have had a fairly tough month . Local-currency and …
28th February 2023
Investors seem to have become more worried about inflation recently, with evidence that the global economy is holding up better than expected suggesting underlying price pressures might prove more persistent than hoped. That’s taken a toll on both “safe” …
23rd February 2023
Falls in exports from Korea and Taiwan have weighed on corporate earnings in these economies, but even if that continues for a while we think their equities will hold up fairly well. Evidence has grown recently of a divergence between the health of the …
We expect MSCI’s Brazil Index to drop over the next couple of quarters in local-currency (LC) terms, before it begins to recover towards the end of this year. Since end-October, equities in Brazil have generally underperformed equities in other major …
17th February 2023
A further decline in US inflation seems largely priced in to financial markets. But we still think investors are too optimistic about how quickly the economy will grow, and as such are sticking with our view that equities will come under renewed pressure, …
14th February 2023
We think stock markets in several commodity-intensive countries will benefit from China’s ongoing reopening, which, in our view, will mean commodity prices rise further by the end of the year. The end of the zero-COVID policy and a renewed focus on …
10th February 2023
Some of the moves in China’s financial markets that followed its rapid reopening – including a rise in equity prices, higher bond yields and stronger renminbi – have unwound in the past couple of weeks, but we think they will resume before too long. …
We think sovereign bond yields in Canada, Australia, and New Zealand will drop further by end-2023. The central banks of Canada, Australia, and New Zealand have generally been at the forefront of this tightening cycle in terms of starting to hike rates ( …
8th February 2023
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
We think the rapid economic recovery in China will lead to further gains in equities in China and other emerging markets (EM) this year. Despite some recent weakness, equities in China have rallied since the end of October, as a shift toward living with …
31st January 2023
Although there has been some good news for risky assets over the past couple of months, we still think they will struggle before long as economic growth disappoints in major advanced economies. The global equity market rally that began at the back end of …
30th January 2023
A streak of stronger-than-expected economic data in the euro-zone has given markets there a boost this year. But with much of the good news seemingly already discounted, and, in our view, a still hawkish ECB, we expect rallies in equities and government …
27th January 2023
We forecast the 10-year Treasury yield to decline between now and the end of the year, as inflation eases further and the Fed transitions to monetary loosening. A key risk to this projection, in our view, is the weak outlook for demand for Treasuries, …
26th January 2023
We think equities in Japan will come under renewed pressure in local-currency (LC) terms over the coming months, amid an economic slowdown and further strengthening in the yen. So far this week, equities in Japan have generally outperformed equities in …
25th January 2023
We expect rate hikes in Canada, Colombia, South Africa and Thailand… …but expect central banks in Hungary and Chile to leave rates on hold US data likely to show that economic momentum faded in December (Thu. & Fri.) Key Market Themes Although the …
20th January 2023
We think the yield of 10-year Japanese Government Bonds (JGBs) would rise to at least 1% if the Bank of Japan (BoJ) decided to abandon Yield Curve Control (YCC), which could conceivably happen as soon as tomorrow. But we wouldn’t be surprised if it ended …
17th January 2023
We have revised up our forecasts for equities in China, given a brighter outlook for the economy there. We have also increased our China 10-year sovereign bond yield forecast for end-2023, as we think that a faster economic recovery will lead to tighter …
13th January 2023
Further big falls in inflation seem now to be discounted in major developed markets, especially the US. That helps to underpin our view that high-grade government bond markets will only rally a little further over the remainder of this year even if, as we …
12th January 2023
While we think the hawkish ECB poses a near-term threat to euro-zone government bonds, we still expect their yields to be lower, in general, by the end of this year . Having climbed throughout December, developed market government bond yields have …
6th January 2023
