Filtered by Subscriptions: Global Markets Use setting Global Markets
Strains in financial markets are continuing to ease slowly as central banks’ efforts contain the fallout from the pandemic take effect and equity markets rebound on hopes that the spread of the virus is slowing. But vulnerable sovereigns remain in the …
17th April 2020
We continue to think that most EM currencies will end the year higher than their current levels, even if they face further turbulence. But we don’t expect them to recover as strongly as they did after the GFC. As we have discussed previously , emerging …
If, as we expect, the global economy starts to recover in the second half of the year, the yields of core government bonds are likely to rebound a bit further. But we think that weak inflation and continued ultra-loose monetary policy will keep yields at …
9th April 2020
We think that the earnings of firms in the MSCI EM Index will fall sharply this year as the coronavirus pandemic reduces world trade by a fifth and commodity prices only recover slightly. But with much of this outcome probably already discounted, we think …
8th April 2020
Although the valuation of the overall MSCI Emerging Markets (EM) Index is not unusually low, EM equities outside Asia and in some “cyclical” sectors now appear quite attractively valued by past standards. As in the case of developed market (DM) equities, …
7th April 2020
Strains in the financial system appear to have eased a little over the past week or so, as policymakers continue to roll out new support measures. Our view remains that while central banks can probably prevent the pandemic from morphing into a full-blown …
3rd April 2020
Although analysts’ expectations for corporate earnings have been revised down quite significantly since the coronavirus began to spread around the world, stock prices suggest that investors are braced for an even worse outcome. With that in mind, we think …
2nd April 2020
We forecast that the credit spreads of euro-zone peripheral bonds will fall back further this year and remain low in 2021 thanks to unwavering support from the ECB. But public finances will be deteriorating, especially in Italy, which raises the risk of a …
While the coronavirus epidemic will probably weigh on the US economy much beyond the end of this year, we suspect that the S&P 500 will start recovering in the second half of 2020. According to the NBER’s Business Cycle Dating Committee, there have been …
1st April 2020
While the worst may be yet to come for emerging market currencies, we expect that most will end this year stronger than they are now. Emerging market currencies have had a difficult year so far : our equal-weighted index of twenty large EM currencies has …
In our view, global equities are not as “cheap” as the recent falls in price/earnings ratios seem to suggest. That is because earnings expectations are likely to be revised down much further as the crisis unfolds. Although the selling pressure in stock …
27th March 2020
Although we think that continued support from policymakers will prevent a financial system meltdown that would amplify the economic shock from the coronavirus pandemic, tensions in markets are likely to remain significant until there are signs that the …
25th March 2020
While we think that most currencies will eventually regain much of the ground that they have recently lost to the US dollar, we don’t expect that process to start until the pandemic has clearly passed its worst . The US dollar has strengthened this year …
24th March 2020
The slump in the prices of commodities has hit hard the currencies of the countries whose fortunes depend heavily on them. (See Chart 1.) But if we are right and commodity prices eventually recover as the coronavirus pandemic is brought under control, …
23rd March 2020
Our view remains that, despite policymakers’ best efforts, a sustained turnaround in equity markets will only come once the virus starts to fade. That hasn’t happened yet. So, we suspect that they will fall a bit further in the coming months, despite …
20th March 2020
The turmoil in financial markets caused by the global spread of COVID-19 shows little sign of abating, despite policymakers’ efforts to contain the fallout. Our view remains that until evidence emerges that the spread of the virus is slowing down, risky …
17th March 2020
Judging by the bear markets of the past fifty years or so (see here ), the valuation of the US stock market can make a big difference to how far it falls and how long it takes before it reaches a floor. With that in mind, this note fleshes out what role …
13th March 2020
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 economic fallout from the coronavirus outbreak is likely to be particularly severe for a number of frontier markets. Due to its deep integration into global supply chains, Vietnam’s economy will be disrupted more than most by China’s factory closures. …
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
Given our view that investors’ expectations for further Fed rate cuts this year will be disappointed, we think that the twin rally in US equity and bond markets will end before long. After falling by about 3% in the immediate aftermath of the virus …
18th 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
Even if the coronavirus outbreak in China is brought under control and the recent moves in equity and bond markets unwind, we think that most EM assets will not make significant gains this year. This reflects our long-held pessimistic view of China’s …
11th 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 …
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
Official talks between Argentina’s new government and the IMF over the future of its record-breaking bailout started this month but, with the government having already restructured some of its local law debts, the need for urgent external financing has …
29th January 2020
After a stellar 2019 for most risky assets, we think that they will generally make only small gains in 2020. Admittedly, our forecasts assume that the effects of the coronavirus outbreak on markets will eventually unwind, since we simply don’t know how it …
27th January 2020
Despite lingering uncertainty around the next phase of the UK’s exit from the EU, we think that there is more upside for sterling, Gilt yields, and UK equities. The UK is set to leave the EU on 31 st January, but the risk of a disorderly end to the …
24th 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
While the dollar looks overvalued on most metrics, and has risen significantly over recent years, we don’t think that it is very overvalued. In our view, its valuation will not stop it from strengthening a bit further over the next couple of years. …
17th 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
We think that the returns from emerging market (EM) equities in 2020 won’t be anywhere as good as in 2019. While this view is partly premised on our forecast that earnings growth will generally be weak, valuations are also unlikely to provide much …
13th 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
Argentine and Lebanese sovereign dollar bond spreads have narrowed over the past month (see Chart 1), but we think that they will widen again before long. The narrowing has been most dramatic in Argentina, where the new finance minister struck a …
19th 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 …
Despite recent optimism about trade and Brexit, we doubt that equities in developed markets (DMs) will fare as well next year as they have in 2019. That said, those in the UK will be an exception in our view. Two key factors have boosted equities across …
17th December 2019
The UK general election has provided a clearer path towards a resolution to Brexit and looser fiscal policy, which should boost economic activity and push up sterling, UK equities, and Gilt yields. That said, as long as there remains the possibility of …
13th December 2019
Optimism about an imminent resolution to the trade war between the US and China and subsiding protests in Latin America have supported EM currencies over the past month. But, barring a few exceptions, we think that they will weaken against the US dollar …
11th December 2019