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We think the capital market reforms announced as part of China’s Third Plenum won’t be enough to reinvigorate China’s equities, which we still think will provide disappointing long-run returns. It’s been a tough few days for China’s equities, which had …
26th July 2024
Strong public investment growth alongside overall fiscal prudence have contributed to the rallies in India’s bond and stock markets over the past couple of years. However, we don’t see much in the latest budget to revise our view that gains in the coming …
The global IT outages affecting Windows software are causing huge temporary disruption to certain sectors including travel and healthcare, but while things are still very uncertain we do not anticipate a major macroeconomic or financial market impact at …
19th July 2024
China’s bond market seems to be caught between the country’s slowing economy and the PBOC’s desire to push long-end yields higher. The announcements from the Third Plenum this week probably won’t help the central bank, and we still think yields will fall …
The valuations of “risky” assets have continued to rise, both in absolute terms and relative to “safe” asset yields. We think that reflects the inflation of a bubble in stock markets, itself a consequence of growing enthusiasm about AI technology. But our …
12th July 2024
We anticipate the spread between 10-year Swiss and German government bond yields, which has widened significantly since 2022, will narrow only slightly over the next couple of years. The spread between 10-year Swiss and German government bond yields has …
11th July 2024
The results of France’s parliamentary elections mean it should avoid the large, unfunded fiscal expansion that two of the three major political groups were advocating. But it also means France is very unlikely to be able to reduce the deficit as required …
8th July 2024
We continue to expect equities to outperform most other assets through the end of next year, as the hype around AI builds and lower inflation facilitates more monetary easing in some places than investors are discounting. The tech-heavy US stock market …
1st July 2024
With unhedged yield gaps still very much in favour of overseas bonds and hedged returns set to improve as overseas central banks slash borrowing costs, Japanese investors won’t respond to higher JGB yields by repatriating capital. And while we expect …
This Update summarises the answers to some of the questions which clients raised in our recent online briefing about the forthcoming French legislative elections. The questions are divided into three sections: politics, economics, and markets. (The online …
24th June 2024
Latin American assets have generally underperformed those elsewhere of late, in part driven by rising risk premia on the region’s assets. We think these risk premia may rise further over the coming year or so, given our downbeat view on economic growth in …
21st June 2024
We think the S&P 500 will make further gains over the coming months, even though it’s already fared well this year and is approaching our existing end-year forecast. As such, we’ve revised that forecast up. Meanwhile, we think equities elsewhere will …
We expect political uncertainty in France to maintain a floor under government bond spreads in the near term, not only in France but also in other vulnerable euro-zone countries. Further ahead, we see scope for spreads to fall back in Greece, Portugal, …
19th June 2024
The 10-year yield spread between government bonds in France and Germany has risen above 80bp, its highest since the euro-zone debt crisis. Should the far-right National Rally be in a position to form a government after the upcoming elections, we suspect a …
14th June 2024
We are retaining our forecast that the 10-year Treasury yield will fall to 4.0% by the end of this year. That reflects our expectation that the Fed will pursue a slightly looser conventional monetary policy than the one discounted in the financial markets …
13th June 2024
Elections in South Africa, India, and Mexico have generated sizeable reactions in their financial markets over the past week or so, highlighting the potential for electoral surprises to generate short-term volatility. This Update takes stock of the …
7th June 2024
India’s election result isn’t, in our view, reason to turn downbeat on the country’s equity market, its wobbles earlier this week notwithstanding. But with a very positive story seemingly still priced in to India’s equities, both on the political and …
6th June 2024
We think the Fed and most other DM central banks will be able to ease monetary policy this year and next more than investors currently anticipate. As a result, we forecast that Treasury yields will end 2024 below their current levels, putting downward …
29th May 2024
The sharp drop in frontier market sovereign dollar bond spreads this year has caught many by surprise. We think there’s a case that the bond rally may have gone too far in Argentina, Ecuador and Tunisia. But the decline in spreads in some frontiers, …
24th May 2024
Corporate credit spreads have been near historical lows in recent weeks, and we think they will remain close to these levels in the coming months. The first two charts below illustrate how narrow the latest levels of US corporate credit spreads are …
23rd May 2024
Having underperformed most other EMs since the pandemic, we think that returns of financial assets in South Africa will continue to disappoint. The outlook would worsen if the African National Congress (ANC) ends up forming a coalition with radical …
Improving sentiment towards Chinese equities has sparked a further rebound over the past month, with stocks there having generally outperformed those elsewhere over this period. While we continue to see near-term upside, we think they will ultimately …
17th May 2024
For much of the past year, the dollar has strengthened against emerging market (EM) currencies even as EM sovereign dollar bond spreads have narrowed. One way or another, that is unlikely to last. One relatively unusual feature of the strengthening of the …
16th May 2024
This note answers some of the most frequently asked questions that we received from clients during a recent online briefing about the latest US tariffs on China. Watch the original briefing here . What has been announced? Yesterday was the end of a …
15th May 2024
Although Japan’s equities and currency have generally moved in tandem in recent weeks, we think the historical inverse relationship between the two will reassert itself before long. We expect a stronger yen to become a headwind for Japan’s equities in the …
10th May 2024
Despite the correction in equity markets over the past month, risk premia generally remain low across financial markets. While we expect this to continue as an AI-driven bubble inflates in equity markets, this Update explores four areas that could …
3rd May 2024
We think the Fed and most other developed markets (DM) central banks will be able to ease monetary policy this year and next more than investors currently anticipate. DM bond yields will end 2024 below their current levels, putting downward pressure on …
29th April 2024
This interactive dashboard allows you to explore our forecasts for equities and bonds through to end-2026. To explore what these forecasts imply for total returns from these assets, across a range of currencies, please visit our interactive Total Return …
We think the recent recovery in the share prices of some of the ‘Magnificent 7’ is a sign that the earlier pull-back in their collective performance wasn’t a harbinger of a far bigger correction in the NASDAQ 100. On the contrary, we suspect that index …
26th April 2024
The US dollar would have to appreciate a lot further before having significant effects on the global economy and financial system. A key risk to watch for is the widening policy divergence between the US and Asia leading to a major depreciation in the …
25th April 2024
The risk premia on Turkish assets are now low relative to the past decade or so. We think that will remain the case over the coming quarters, given the positive global risk-on attitude and the ongoing shift to traditional macroeconomic policy. Even so, …
18th April 2024
We forecast that bond yields will fall back in most developed markets (DMs) over the next year or so, as central banks generally embark on bigger easing cycles than investors currently expect. But given our view that the Federal Reserve faces more hurdles …
Despite yet another hotter-than-expected US CPI release, there are few signs in bond markets that long-term inflation expectations are de-anchoring. That supports our base case that US Treasury yields will fall back later this year, even if it also …
11th April 2024
We expect equities to outperform most other assets as a bubble fuelled by AI-enthusiasm continues to inflate, supported by a backdrop of resilient economic growth and monetary easing cycles. In particular, we expect US equities to continue to lead the …
4th April 2024
We expect the spreads between the yield of the 10-year German bund and its ‘riskier’ counterparts in other euro-zone economies to narrow only a little further this year. If anything, we think that the fiscal outlooks in France and Italy mean that the …
27th March 2024
While the Bank of Japan’s JGB holdings have started to shrink and will continue to do so now that Yield Curve Control is over, we think that the normalisation of the Bank’s balance sheet could take up to a decade. While shrinking central bank demand for …
26th March 2024
The valuations of “risky” assets have kept rising so far this year, even as “safe” asset yields have rebounded. While risky asset valuations are quite high by past standards, we doubt this will prevent equities from rising a lot further this year and …
21st March 2024
We think Emerging Market (EM) dollar bond yields will fall in general by the end of this year, thanks both to lower US Treasury yields and, in some cases, narrower spreads. But the sovereign dollar bonds of some EM economies, such as South Africa and …
20th March 2024
We hosted an online briefing to discuss EM financial risks in more detail. Watch the recording here . Our risk indicators are presented as an interactive EM dashboard on our website here . The past few years have sharpened investors’ focus on assessing …
Credit spreads aren’t bound to fall further if a bubble continues to inflate in the stock market, judging by what happened in the US in the second half of the 1990s. Admittedly, the option-adjusted spreads (OAS) over underlying Treasuries of ICE BofA’s …
19th March 2024
The past few months have seen risk premia compress across most financial markets, and stress across core financial markets appears lower than at any point since mid-2021. While some lingering risks remain, we think that an emerging bubble in equity …
15th March 2024
This Global Markets Focus looks at whether Chinese equities’ recent rally heralds the start of something larger and more sustained. It argues that they could continue to do well over the next year or two, both in absolute terms and relative to many other …
Given our view about monetary policy, we expect government bond yields in some developed markets such as the UK to fall markedly this year. In some other places, like the euro-zone, we doubt central banks will have much impact on yields. And we see scope …
7th March 2024
We think the Fed and most other DM central banks will deliver a bit more policy rate cuts this year and next than investors currently anticipate. As a result, we forecast that Treasury yields will end 2024 slightly below their current levels, putting …
28th February 2024
We are revising up our end-2024 and end-2025 forecasts for the 10-year Treasury yield by 25bp, to 4%. This reflects recent changes to our projections for the federal funds rate . Nonetheless, our new forecast for the 10-year yield still implies a small …
We think victory for Donald Trump in this year’s US presidential election would lead to higher Treasury yields than if incumbent Joe Biden (or another candidate) won. In our view, another Trump term would also be a headwind for equities – especially …
22nd February 2024
Unlike most bubbles, this one hasn’t been accompanied, at least so far, by obvious signs of high and rising leverage. On the other hand, the share of funds invested in ‘passive’ products is now much higher than in prior bubbles. This Update considers how …
20th February 2024
We expect India’s stocks, bonds, and currency to rally over the remainder of this year. It’s been a strong start to the year for India’s financial markets. The MSCI India Index of the country’s equities has been the strongest performer of MSCI’s large …
16th February 2024
US corporate credit spreads have continued to shrink even as bankruptcies have soared but, while they are now fairly narrow, we think there is still some scope for them to tighten further over the remainder of this year. It hasn’t been a great start to …
8th February 2024
While the overall incidence of sovereign debt distress in the emerging world has fallen back since last year, sovereign debt distress in frontier markets hasn’t. And, if anything, things have taken a turn for the worse in recent weeks in some of the more …
7th February 2024