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Spillovers to other emerging markets (EMs) from Turkey’s ongoing currency crisis have been limited so far and we think this will remain the case even if Turkey’s financial markets remain under pressure . Turkey’s financial markets generally have taken a …
24th November 2021
US 10-year inflation compensation has risen by another 20bp or so over the past month and we think it will increase further as inflation in the US proves more persistent than most expect. This is one of the reasons why we forecast the yields of long-dated …
19th November 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 …
The precipitous decline in Sri Lanka’s foreign exchange reserves means the risk of a near-term sovereign debt default is increasing. Elsewhere, Tunisia also stands out on account of its public debt problems. Fiscal challenges look severe in Ghana, Oman …
11th November 2021
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
While long-dated government bond yields have risen quite a bit in recent months, we suspect that continued inflationary pressure and the prospect of tighter monetary policy means they still have some way to climb. We expect yields to rise by the most in …
27th October 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
We don’t think the low valuations of emerging market (EM) equity indices relative to those of developed markets (DMs) is reason to expect EM equities to outperform over the next couple of years. Equity market valuations, as measured by price/forward …
18th 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 forecast that the valuation of the US stock market will deflate a bit further over the next couple of years, though we are not expecting a sharp decline . To recap, the valuation of the S&P 500, as measured by its blended 12-month forward …
8th 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 …
Even if the current concerns around Evergrande abate, we think China’s stock market will continue to underperform many of those elsewhere over the next couple of years. Worries about Evergrande have continued to weigh on stock markets in China and …
22nd September 2021
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
We don’t expect the recent surge in Japan’s stock market to last, and think it will make much smaller gains over the next couple of years . The remarkable rally in Japan’s stock market over the past couple of weeks, following the resignation of the …
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
We think slower growth in China will continue to weigh on the country’s stock market, as well as those of some other emerging markets (EMs). This month’s activity data out of China emphasised how the country’s economy has continued to slow. The latest …
27th August 2021
A year after the Fed announced its new policy framework, we think that bond markets still don’t fully reflect the likelihood of a prolonged period of above-target inflation. While much of investors’ attention at the Fed’s Jackson Hole conference later …
25th August 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 …
The disbursement of Special Drawing Rights (SDRs) from the IMF later this month is a boon for some Frontier Markets that face very high borrowing costs. But beyond this, it is hard to find many positives for Frontiers. The spread of the Delta variant, …
10th August 2021
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
While measures of the valuation of China’s stock market have fallen recently, we don’t expect them to rebound soon. This helps to underpin our fairly downbeat forecasts for the country’s stock indices. After getting close to its highest levels in over a …
5th August 2021
While long-dated government bond yields have plummeted in recent months, we suspect that high inflation and the prospect of tighter monetary policy will see them turn a corner before long. We forecast long-term yields to rise across most major economies, …
30th July 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
While we don’t think that risky assets are in a systemic bubble, we suspect there is limited scope for further large increases in valuations to drive their prices higher over the next few years . Despite the fall in equity markets this week, the …
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 …
We think investors may be overestimating how much monetary policy tightening is on the way in emerging markets (EMs), but still expect long-dated EM government bond yields to rise a bit from here. Over the past month the tightening cycle among EM central …
29th June 2021
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 hawkish surprise delivered by the Fed at its latest meeting and the subsequent market reaction have not changed our view that the 10-year US Treasury yield will end the year higher and that the “rotation trade” in equity markets will resume before …
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