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While some of the large shifts in the FX market over the past weeks may unwind if the coronavirus epidemic fades, we have revised some of our forecasts to reflect the sharp fall in US interest rates and the price of oil. Before the global spread of the …
12th March 2020
Although the US high-yield credit spread soared on Monday to its highest level in nearly four years, we don’t think that the US economy is bound to plunge into another deep recession. Not surprisingly, the surge in the option-adjusted spread (OAS) of ICE …
10th March 2020
If, as we expect, worst fears about the coronavirus outbreak don’t materialise, global stock markets will probably generally recover. However, we doubt that this will be the case for equities in Emerging Asia, which feeds into our view that MCSI’s EM …
6th March 2020
Given the rapid spread of the coronavirus and the Fed’s emergency rate cut, we are revising down our end-2020 forecast for the US 10-year Treasury yield from 2% to 1.25%. The continued increase in new virus cases across the world suggests that the …
4th March 2020
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
In our view, the coronavirus epidemic would have to get much worse for central banks to deliver more rate cuts that investors now anticipate. As such, we think that government bond yields in most developed economies are more likely to rise than fall …
27th February 2020
The growing possibility that the COVID-19 virus will have a widespread and lasting impact on the global economy increases the downside risks to our forecasts for equities and bond yields. Until recently, the most likely scenario appeared to be that the …
26th February 2020
While the euro has already fallen to its lowest level in nearly two years against the US dollar, we think that it will drop a bit further during the rest of 2020, pushed down by several factors including a weaker economic outlook and looser monetary …
19th February 2020
We think that the greenback will remain strong this year, even if some of its recent strength may unwind. The dollar has started the year on the front foot : since 1 st January it has appreciated by about 3% on average against other G10 and 2% against …
17th February 2020
We think that the recent rebound in the yields of many developed and emerging market government bonds will generally continue in the rest of this year, if the coronavirus epidemic is contained. By contrast, we expect EM currencies, which have not …
13th February 2020
While Chinese equities and bond yields might return to their levels of early-January if the coronavirus epidemic is contained, our bearish view of China’s economy suggests to us that they and the renminbi will go back down before the end of the year. It …
11th February 2020
Bernie Sanders is still a long way from the White House, but several of his policies look very negative for US equities. If his support continues to climb that could start to weigh on the US stock market. It remains up for debate whether Bernie Sanders or …
7th February 2020
We wouldn’t be surprised if the recent recovery of EM equities continued over the coming weeks, with the stock markets of those countries that fell furthest following the outbreak of the coronavirus making up lost ground. Nonetheless, we wouldn’t expect …
6th February 2020
Although there remains significant political uncertainty in many euro-zone countries, we doubt that this will prevent most government bond yields from falling a bit further this year. Expectations for monetary policy often have the biggest influence on …
3rd February 2020
The market impact of the coronavirus outbreak in China has escalated over recent days, and increasingly resembles last year’s trade-war-driven turmoil in May and August. But unless the fallout from the epidemic escalates significantly, it is hard to see …
31st January 2020
While we have altered our forecasts for ECB policy this year, we are still more dovish than investors about the outlook for interest rates in the euro-zone. As such, we continue to think that government bond yields in the region will fall back and that …
21st January 2020
Optimism about a Phase One deal has driven the rally in Chinese equities and the renminbi since late 2019. But now that the deal has been signed, this ought to be fully discounted in the markets. And with a Phase Two deal unlikely anytime soon, if at all, …
16th January 2020
Corporate bond markets in the US, the UK and the euro-zone have started 2020 on a strong footing, largely reflecting expectations that monetary policy there will remain accommodative for the foreseeable future. While we agree with investors that central …
10th January 2020
While corporate earnings in the US will probably recover a bit this year, we think that they will fall short of expectations of a big rebound. And given that we don’t expect valuations to rise anything like as fast as they did last year, we anticipate …
9th January 2020
After large gains for both bonds and equities in 2019, we expect that both will fare less well next year. And, in contrast to most other forecasters, we think that the US dollar will rise further in 2020. While we forecast that the global economy will …
23rd December 2019
Despite a rise in oil prices over the past couple of months, the Canadian dollar and the Norwegian krone have underperformed most other G10 currencies. Nonetheless, we expect both to fare better next year. Since the start of October, the price of Brent …
19th December 2019
A surprise win for Labour at Thursday’s election could be a major shock to UK equity markets. There are few recent examples of an unexpected sharp left-ward political turn in a developed economy. But there are some historical precedents that help put a …
6th December 2019
Given our pessimistic view of China’s economy and the trade war, we think that the underperformance of developed market (DM) companies exposed to China will continue. Admittedly, the MSCI index that tracks those firms has actually done pretty well this …
4th December 2019
Despite President Trump’s frequent complaints about the strength of the dollar, its valuation is not especially high in our view and is unlikely to prevent it from rising further in the next couple of years. Admittedly, the US currency has risen a long …
2nd December 2019
We doubt that the global pick-up in government bond yields will resume anytime soon, so domestic monetary policy is likely to be the key driver of bonds in Switzerland and the Nordics. With that in mind, while we think that bond yields in Norway will not …
25th November 2019
The Labour Party’s manifesto contains several measures which, if implemented, would have a significant negative effect on UK equites. A surprise Labour win could send UK equities tumbling, despite a softer Brexit. Labour’s manifesto is one of the most …
22nd November 2019
US Treasury yields have rebounded over the past few weeks, as worries about the US-China trade war and the outlook for the global economy have eased somewhat. But while we don’t expect them to revisit their lows, we also think that Treasury yields are …
20th November 2019
Optimism about trade has been a factor behind the rally in global equities in the past month. But with a “mini-deal” now largely discounted in the markets, and economic growth unlikely to do better than stagnate over the next couple of years, we suspect …
19th November 2019
Although volatility in the US stock market is expected to remain very low, we don’t think that this is a worrying sign that investors are being complacent. That is because big stock market corrections are usually the cause , rather than the symptom, of an …
15th November 2019
The loss of the South African government’s final investment grade credit rating is already largely priced in, but there are still reasons to be downbeat on the country’s government bonds, and the rand . Concerns about the South African government’s large …
11th November 2019
If the Conservative Party wins an outright majority in the upcoming general election on 12 th December, as polls suggest is the most likely outcome, there is potentially significant upside for UK equities. Since the 2016 referendum, UK mid- and large-cap …
8th November 2019
Polls suggest that the general election in Spain this weekend will not end the political deadlock there. That is the key reason why, despite brighter growth prospects, we doubt that bonds and equities in Spain will do better than those elsewhere in the …
7th November 2019
Against a backdrop of stubbornly-low inflation and rising unemployment, we now think that the RBA will launch quantitative easing (QE) in 2020. Here, we consider the implications for Australia’s assets. Assessments of the impact of QE elsewhere are not …
The Riksbank appears determined to raise interest rates into an economic slowdown. While higher policy rates may provide some support for the Swedish krona, we still think that it will continue to depreciate. To the surprise of most analysts, ourselves …
1st November 2019
The yield of 10-year government bonds in Greece is now only slightly above that of 10-year government bonds in Italy. Given Italy’s comparatively poor growth and debt dynamics and greater political risk, we think that it is only a matter of time before …
30th October 2019
Equities in the euro-zone have outperformed those in the US since early October. While we expect this trend to continue, we think that both will fall in the rest of this year, as global growth slows further. While both the MSCI EMU Index and the MSCI USA …
24th October 2019
We think that the recent weakness in emerging market (EM) currencies will continue during the rest of 2019, as a weaker global economy triggers a fresh bout of risk aversion. In 2020, we think that the renminbi and the currencies of other Asian EMs with …
23rd October 2019
While we think that there is still a bit more scope for the Norwegian krone to fall against the euro, we expect the currency to bounce back over the next couple of years, as the country’s terms of trade improve. For all the talk about krone weakness, its …
We expect the rally in corporate bonds in the US, UK and euro-zone to unwind a bit in the rest of 2019 as global growth slows further. Next year, we think that corporate bonds in the US and the UK will continue to struggle, but those in the euro-zone will …
18th October 2019
Though government bond yields have rebounded over the past week, inflation compensation remains near record lows in the US and the euro-zone. In our view, this is unlikely to persist, especially in the US, which is one reason why we expect Treasury bond …
17th October 2019
The corporate earnings season starting this week in the US could provide the trigger for the drop in the S&P 500 that we forecast to happen this year. Indeed, we think that earnings will disappoint expectations, and doubt that Fed policy or a big …
15th October 2019
As the outlook for the global economy continues to worsen, we expect risky assets generally to struggle over coming months and emerging market equities to fall further. East Asian markets are likely to fare worst, in our view, while Indian equities hold …
11th October 2019
The yield of 10-year government bonds in Portugal has fallen below that of their counterparts in Spain this week after Portugal’s Socialist Party retained power in Sunday’s legislative elections. While we think that the yield spread will stay low by past …
We expect appetite for risk and monetary policy to continue to be more important factors than commodity prices in determining the direction of the Aussie, Kiwi and Loonie. With that in mind, we think that the relative resilience of the Loonie so far this …
9th October 2019
As the outlook for the global economy grows gloomier, the US dollar is strengthening towards multi-year highs. We expect it will appreciate further as safe haven demand intensifies over coming months. After rising by 5% in 2018, the US dollar has …
4th October 2019
While the hike to Japan’s sales tax means its economy will probably contract in Q4, we suspect that the impact on bonds and equities there will be fairly small. However, we still think that Japan’s stock market will fall by the end of this year, as waning …
3rd October 2019
Investors’ continued optimism about corporate earnings in the US is hard to square with our view that economic growth there and in the rest of the world will remain weak. That is the key reason why we expect US equities to perform poorly during the rest …
27th September 2019
We have revised up our forecasts for India’s Sensex equity index following the corporate tax reform there. And more generally, we expect it to be one of the best performers among EM stock markets over the next few years, even if it falls back a little …
The combination of a broad-based easing cycle in emerging markets and strong demand for risky assets has pushed local currency emerging market (EM) sovereign yields down sharply in 2019. However, we expect that rally to go into reverse by the end of the …
25th September 2019
Given our view that the US economy will avoid a recession, we doubt that the Fed will deliver as many rate cuts as investors anticipate. As such, we think that Treasury yields will rise substantially next year. To re-cap, the Fed voted this week to cut …
20th September 2019