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We now expect the Treasury yield curve to flatten further over the next couple of years but think that, in contrast with recent developments, this will happen alongside rising long-term yields. The US Treasury yield curve has flattened sharply over the …
9th December 2021
This Update takes stock of the moves in developed market (DM) asset markets in response to the “Omicron” variant, and provides initial thoughts on how we think things might progress if some of the fears about it are realised. Speculation that Omicron …
3rd December 2021
We now think that, rather than remaining broadly stable, the spreads of euro-zone “peripheral” bonds will widen somewhat over the next two years as the ECB gradually normalises monetary policy. That said, we still expect spreads to remain low by …
17th November 2021
In contrast with our expectations for sovereign bond yields to rise around the rest of the world, we think that the 10-year Chinese government bond (CGB) yield will decline over the next couple of years as the country’s central bank loosens monetary …
12th November 2021
We think expectations for corporate earnings in the US and most of Europe are unlikely to improve much further. One exception is the UK, where earnings expectations look a bit less upbeat . Back in July, we showed that expectations for corporate earnings …
While Brazil’s bond and stock markets have struggled lately, we don’t think either are set for a significant rebound any time soon, and suspect both will remain under pressure in the run-up to next year’s election. The falls in Brazil’s financial markets …
5th November 2021
While the recent rise in the yields of short-dated developed market (DM) government bonds looks overdone to us, we still think that the yields of long-dated bonds will resume their rise . Charts 1 and 2 show that DM yield curves have flattened …
3rd November 2021
Although slowing growth in China has probably weighed on US Treasury yields in the past, we don’t expect it to prevent them from rising over the next couple of years. The latest activity data out of China emphasise how much the country’s economy – which …
21st October 2021
While the yields of long-dated government bonds in the euro-zone, UK and US have dropped back a bit in recent days, we think they will rise between now and the end of 2023. We expect increases in yields to be particularly large in the US given our view …
14th October 2021
We think the prices of most commodities will fall over the next couple of years, and that this will prove to be a headwind for many countries’ stock markets. But the strength of that headwind will vary significantly, in our view, even among the most …
7th October 2021
We expect the yields of 10-year emerging market (EM) local-currency (LC) government bonds to rise over the coming years. But, in most EMs, we think yields will rise by less than the 10-year US Treasury yield. While EM LC government bond yields have …
6th October 2021
While financials and real estate have been among the worst-performing sectors in the MSCI China Index this year we think that there may be scope for them, as well as the energy sector, to outperform the materials and health care sectors and “technology” …
29th September 2021
We doubt ‘tapering’ of the Fed’s asset purchases over the next year or so would weigh heavily on the US stock market, and forecast that it will make small gains over the next couple of years. At last week’s FOMC meeting, Fed officials gave, among other …
While we expect the yields of long-dated sovereign bonds to increase further across developed markets over the next two years, we think they will rise by more in the US than in the euro-zone and the UK. This is based on our view that inflation will prove …
17th September 2021
Despite the fall in oil prices that we expect over the coming years, we forecast the MSCI Emerging Markets (EM) EMEA Index to make further gains and continue to outperform the broader MSCI EM Index. The recent strong performance of equities in EMEA adds …
While uncertainty remains about the implications of the resignation of Japan’s PM Suga for the country’s equities, we think the big picture is that they will see relatively small gains over the next couple of years. The resignation of Japan’s Prime …
10th September 2021
We think that the increase in long-dated Treasury yields which we forecast will push up the yields of equivalent emerging market (EM) local-currency (LC) bonds. Based on historical relationships, we expect yields to rise by less than in the US in most …
8th September 2021
We don’t think tapering by the Fed will cause long-term Treasury yields to rise sharply, although it may contribute some upward pressure. But we do think those yields will rise quite a bit anyway, mainly because of the outlook for inflation in the US. …
3rd September 2021
Progress made by countries in dealing with COVID-19 still seems to have had little bearing, in general, on the relative performance of their stock markets. Instead, swings in sentiment about the virus at a global level appear to have continued to exert a …
20th August 2021
We don’t expect emerging market (EM) equities, as a whole, to rack up big gains over the next few years thanks in part to the spillovers of lower growth in China. The latest tumble in EM equities, following the tapering discussion in yesterday’s FOMC …
19th August 2021
We think tapering by the Fed will remove an obstacle in the way of higher long-term yields, supporting our view that their latest rebound will continue, in general, over the next couple of years. Recent commentary by Fed officials has brought a slowing of …
13th August 2021
Given our forecasts for the paths of monetary policy across developed markets, we expect a general ‘bear steepening’ of sovereign yield curves in the near term, particularly in the US, Canada and Australia. As it stands, our forecasts imply that most …
While the earnings of firms in the S&P 500 have generally surprised to the upside in the second quarter of this year (Q2), we think the scope for further positive earnings surprises from here is limited . With around 80% of companies in the S&P 500 now …
6th August 2021
In the early 2000s, a ‘glut’ of global saving may have helped restrain rises in long-term US bond yields, even as investors began to discount tighter monetary policy. We don’t think that similar factors explain the latest fall in yields, nor do we expect …
28th July 2021
While we no longer expect peripheral spreads to narrow this year, we still think that they will remain close to their current levels, which are close to the lowest since the Global Financial Crisis. Around a year ago, we argued that the spreads of 10-year …
23rd July 2021
Though we think that the recent decline in the 10-year Bund yield is an overreaction, we expect it to rise only a little over the next couple of years, and by less than yields in many other developed markets . To recap, after rising for most of this year, …
22nd July 2021
Although we expect a significant fall in the price of oil to put some pressure on the energy sector of the US corporate bond market, we expect spreads more generally to remain quite low in the next few years. Since their sharp rise at the onset of the …
16th July 2021
We don’t expect the latest tumble in long-dated US Treasury yields to continue, and still think yields will rise significantly over the next few years. But given developments over the past couple of months, we have pared back our expectations for …
9th July 2021
Although oil prices and inflation compensation have historically moved in lockstep, we don’t think our projection that oil prices will fall over the next couple of years is inconsistent with our forecast for long-term Treasury yields to rise quite a bit. …
2nd July 2021
We think that there is more scope for earnings expectations to improve outside, than inside, the US. In both cases, though, we are not anticipating upward revisions on the scale seen over the past year . A significant degree of optimism about the economic …
Although the 10-year Treasury yield has eased back following last week’s FOMC meeting, we still expect it to increase again before too long. To recap, after surging following the FOMC meeting, the 10-year Treasury yield has since given up its gains . At …
24th June 2021
The yields of 10-year US Treasuries and German Bunds have moved in lockstep since the latest Fed meeting, but we doubt that this will continue. While we expect the Treasury yield to rise sharply between now and the end of 2022, we think that the Bund …
18th June 2021
Wednesday’s hawkish surprise from the Fed adds weight to our views that i) the US stock market will see only limited gains between now and the end of 2023, even as the economy generally continues to power ahead and ii) the stock market ‘rotation trade’ …
While we think that inflation in the US will prove more persistent than both the Fed and investors appear to anticipate, we still expect the S&P 500 to make some further gains over the next couple of years . The past few months have brought increasing …
11th June 2021
The rise in commodity prices has boosted some commodity-heavy stock markets, but we suspect that it will run out of steam before long, limiting those stock markets’ gains over the next couple of years. The surge in commodity prices over the past few …
10th June 2021
While we expect the yields of 10-year emerging market (EM) local-currency (LC) government bonds to increase as the US 10-year Treasury yield resumes its rise, we think increases in yields will generally be smaller than in the US. This reflects our view …
4th June 2021
We think most developed market (DM) central banks will look through temporary rises in inflation and leave rates unchanged until at least early 2023. Even so, we expect the yields of 10-year DM government bonds to rise in the next couple of years, …
3rd June 2021
We expect the S&P 500 to make only small gains over the next few years. But we think some sectors – such as financials – will continue to do better than the index as a whole. The rally in the S&P 500 has lost some steam lately . After gaining ~11% over …
27th May 2021
We expect long-term Treasury yields to rise more decisively before long, driven by long-term real yields. The nominal 10-year Treasury yield has bounced around a bit following some significant data releases lately . (See here .) But the big picture is …
19th May 2021
While we don’t think there is much scope for corporate credit spreads generally to narrow much further from here, in our view spreads in the euro-zone could fall a bit more than those in the US or the UK. Despite the wobble in equity markets over the past …
13th May 2021
We expect equities in the euro-zone to outperform those in the US between now and the end of 2022 even as the economic recovery in the former continues to lag that in the latter . After underperforming the MSCI USA Index for the most part of 2020, the …
10th May 2021
We don’t think stock markets in emerging Asia will come roaring back to life any time soon, and forecast relatively small increases in equity indices there over the next few years. Having been among the best performers during the earlier stages of the …
7th May 2021
Despite tentative signs of improvement in the euro-zone economy recently and our expectation that long-term US Treasury yields will rise significantly over the next couple of years, we forecast that the yields of 10-year euro-zone government bonds will …
6th May 2021
We expect risk premia on emerging market (EM) bonds to diverge over the coming years even if appetite for “risky” assets generally continues to increase . To recap, after rising sharply in February-March last year, risk premia on EM bonds declined …
27th April 2021
We doubt that the recent fall in long-term Treasury yields will persist, and are sticking with our view that they will rise a fairly long way by the end of the year. To recap, after increasing significantly in the first quarter of this year, long-term …
22nd April 2021
We no longer expect the MSCI Switzerland Index to outperform the MSCI USA Index over the next couple of years and have lowered our end-2021 and end-2022 forecasts accordingly. Back in August, we predicted that the MSCI Switzerland Index would outperform …
20th April 2021
We think the IMF’s anticipated $650bn Special Drawing Rights (SDR) allocation is unlikely to have a major market impact, although it might provide countries with falling exchange rates and low levels of reserves – such as Argentina and Turkey – some scope …
15th April 2021
We expect higher government bond yields in the US than in other developed markets (DMs) to push the US dollar up, as has generally been the case since the Global Financial Crisis. Admittedly, the relationship between the government bond yield gap and the …
9th April 2021
In recent years, and particularly since the start of the pandemic, the pressure on central banks to address climate change has increased. This Update considers the potential implications for financial markets of some of the changes they have made until …
8th April 2021
We have recently revised up our end-21 and end-22 projections for the US ten-year Treasury yield, which has prompted us to revise down our forecasts for emerging market (EM) assets and currencies. To recap, we had previously expected EM equities to rise …
26th March 2021