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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
We think investors are still too optimistic on global growth, and that “risky” assets will struggle over the first half of 2023 as a result. Investors seem increasingly to have come around to our view on inflation over the past couple of months, namely …
22nd December 2022
We expect lower global risk appetite, as well as rising country-specific risk premia in some cases, to put upward pressure on the yields of 10-year local-currency (LC) government bonds in emerging markets (EM) in the first half of 2023. But later in the …
21st December 2022
The surge in government bond yields around the world in response to today’s decision by the Bank of Japan (BoJ) to tweak its policy of Yield Curve Control (YCC) highlights the risks to international markets posed by the country’s huge investment overseas. …
20th December 2022
This is part of a series of reports outlining our key macro and market calls for 2023. Click here to view the full series. Our latest Asset Allocation Outlook can be found here . Two of the three topics we expect to dominate the global macroeconomic …
15th December 2022
We suspect investors are underestimating how disruptive the transition from zero-COVID will prove for China, which could threaten some of the recent rises in the country’s equity prices, bond yields and currency. But once that disruption has begun to …
14th December 2022
Although US corporate bond spreads have been falling since mid-October, we expect them to rise again before long as the global economy slips into recession. The spreads of investment-grade US corporate bonds, as captured by the option-adjusted spread …
12th December 2022
We expect the 10-year Treasury yield to decline only a little further as US inflation continues to ease. Treasury yields have fallen sharply in recent weeks, as investors have revised down their expectations for the path of the federal funds rate . The …
9th December 2022
We suspect that the S&P 500 will make a new cyclical low by the spring of 2023 as a shallow recession gets underway in the US, before rebounding to end next year higher than it is now. Our forecast is that there will be a mild economic downturn in the US …
8th December 2022
If China’s authorities were to accelerate the abandonment of their zero-COVID policies, we think it could actually prove a headwind for global asset prices. But we doubt they will do so for a while yet. The protests in China in recent days have …
2nd December 2022
Although Chinese stocks have reversed a two year or so downward trend in the past month amid hopes that zero-COVID policies will end, we doubt this is a sign of things to come in the near term. Since its trough on 31 st October, the MSCI China Index has …
1st December 2022
Most developed market (DM) government bonds and equity benchmarks have rallied over the past month or so, but we doubt this twin rally will persist. While we think bond yields will end 2023 lower than they are now as inflationary pressures ease, we expect …
25th November 2022
Although we think the yields of high-grade, long-dated government bonds will fall in general in the next couple of years, we expect those of Bunds to fall by less than those of Treasuries, as comparatively sticky inflation in the euro-zone keeps monetary …
21st November 2022
Having increased sharply throughout the year, we think that emerging market (EM) local currency sovereign bond yields will probably only increase by a little more in the first half of next year, despite a looming world recession. Yields may then start to …
18th November 2022
We’re sticking with our view that the equity market rally will go into reverse as the world economy slips into a recession. Equities surged last week, boosted by a soft US CPI print . The ~5.5% gain in the S&P 500 on Thursday, for example, was its largest …
14th November 2022
We don’t expect the 10-year JGB yield to rise above the top of the Bank of Japan’s tolerance band, and think it may even fall back to the middle of that band next year as yields continue to decline elsewhere. Yields fell sharply around the world, and the …
11th November 2022
China’s equities have received a boost recently from speculation that the country will ease its strict zero-COVID policy, but we don’t think this marks the start of a more sustained rally; we forecast benchmark Chinese equity indices to fall over the next …
10th November 2022
Brazil’s financial markets have been some of the world’s best performers lately, supported in part by the prospect of centrist policymaking by incoming president Lula. With the presidential election now complete, and Lula set to be inaugurated soon, a …
8th November 2022
Chief Markets Economist John Higgins held a discussion with economists from across our Markets team shortly after the release of our Q4 Outlooks. During this briefing, John and the team answered client questions and highlighted key takeaways from their …
4th November 2022
The differing tones of the Fed, ECB and BoE at their recent meetings have seen yields rise in the US more than elsewhere and reignited the rally in the US dollar. That pattern could last a few more months. But we expect falling inflation in the US to mean …
3rd November 2022
Downward revisions to expectations for earnings have taken a toll in the second half of this year so far on the S&P 500, which had been under pressure in the first half from a discount-rate-driven drop in its valuation. We suspect expectations for …
2nd November 2022
We think the recent rallies in government bond markets will gain steam next year as inflationary pressures ease and central banks, especially the Fed, turn less hawkish. But, while rising real yields have probably been the biggest headwind for “risky” …
28th October 2022
As the recent breakdown of the UK Gilt market illustrates, policymakers face an increasingly difficult trade-off between combating inflation, supporting economic growth and maintaining financial stability. With core bond and currency markets facing very …
26th October 2022
We don’t think the valuations of emerging market (EM) equities will continue to hold up better than those in developed markets (DMs) if, as we expect, the global economy slips into recession. The valuations of emerging market equities – as measured by …
21st October 2022
Although the extra risk premia on the UK’s sovereign bonds and currency that emerged in the wake of the UK’s “mini”-budget have partly unwound, this doesn’t necessarily mean Gilts and sterling are set to return to where they were before Liz Truss’s …
20th October 2022
While the latest change of plans by the UK government takes, in our view, a lot of the upside risk out of Gilt yields, we suspect stubborn risk premia remain that may take some time to fade completely. The latest U-turn in UK fiscal policy seems to have …
18th October 2022
We think benchmark equity indices in Taiwan, Korea and India will fall a bit further over the remainder of this year and into 2023, as the global economy slips into a recession. Although they have generally fallen alongside global equity markets this …
14th October 2022
Despite the hot September US CPI print from yesterday, we still expect Treasury yields to drop back over time. And we think the drop will mostly be driven by falls in the real yield, rather than inflation compensation. Our US Economics Service is the …
Central banks have the tools to deal with liquidity crises arising from rising interest rates and falling asset prices. Instead, the bigger threat is that higher interest rates produce large and simultaneous falls in asset prices that threaten the …
11th October 2022
Note: This report has been updated in the 6th paragraph to reflect 11th Oct. comments from BoE Governor Andrew Bailey. Given that the surge in gilt yields that has forced the Bank of England to intervene in the market was initially driven by the …
With the Fed seemingly still in a hawkish mood and the US and global economies struggling, we now expect the S&P 500 to decline further than we’d previously thought. Much of the volatility in the S&P 500 lately seems to be due to shifts in expectations …
7th October 2022
With monetary tightening cycles approaching their ends in many emerging markets (EMs), we think local-currency (LC) sovereign bond yields will, in general, be much lower in a couple of years than they are now. But we anticipate a significant amount …
4th October 2022
What Lula could mean for Brazil’s financial markets Investors seem to have taken the prospect of a second Lula presidency positively so far, but we suspect returns from the country’s dollar bonds and equities will disappoint over the next couple of years. …
3rd October 2022
While the Bank of England’s temporary U-turn on its balance sheet has caused Gilts to rally strongly, we suspect their yields will remain high for some time yet. The Bank of England dramatically intervened in the Gilt market on Wednesday in response …
29th September 2022
With developed market (DM) central banks clearly in hawkish moods, we have revised up our forecasts for the yields of most 10-year DM government bonds. We no longer expect these yields, in general, to fall much over the remainder of this year. But we …
28th September 2022
Although the latest sell-off in Gilts has been driven in part by expectations for higher interest rates, the accompanying fall in sterling suggests the risk premia attached to UK assets has risen. In our view, in the absence of a concerted attempt to …
27th September 2022
With the Fed still clearly in a hawkish mood, we have revised up our forecasts for the 10-year Treasury yield. We now expect it to be around its current level at the end of this year, in contrast with our previous forecast of a decline. But we still …
23rd September 2022
With Italy’s general election scheduled to take place this weekend, this Update answers six key questions about what to expect in the days and months following the vote. 1. When will we know the election results? The first exit polls will be released …
22nd September 2022
The outlook for China’s economy has deteriorated recently, but it still doesn’t look like the PBOC will ease policy much in response. We suspect that if the central bank were to have a change of heart, it would be quite disruptive to the country’s …
16th September 2022
Even more caution than usual should be exercised when using UK overnight indexed swap (OIS) rates to infer the expected path of Bank Rate over the next couple of years. This is because they have risen by far more than the yields of Gilts with comparable …
15th September 2022