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Despite all of the debt and deficit news out of the US, the spotlight in ultra-long bond markets has increasingly been focused on Japan. The surge in yields there last week seems to have sparked a global sell-off, and the subsequent plan from Japan’s …
28th May 2025
The 10-year Treasury term premium, as estimated by ACM , rose to a more-than-decade high of ~0.9% last week amid renewed concerns about US fiscal policy. But while the premium remains far below the ~4% it topped in the early 1990s, for example, we doubt …
27th May 2025
We think the yields of Japanese government bonds will continue to rise, but because of BoJ hikes rather than concerns about fiscal sustainability. Fragile bond market sentiment hasn’t been limited to the US lately: a sharp rise in yields in Japan has …
23rd May 2025
The passage of Donald Trump’s ‘one, big beautiful bill’ through the House of Representatives today has done little to calm nerves in the bond market, which had already been frayed by Moody’s recent decision to downgrade the US’ sovereign credit rating and …
22nd May 2025
Debate over the end of US equity exceptionalism had quietened over the past month amid a historic rally, but with US assets selling off today debate may reignite. Our sense is that US stocks will hold up well against their peers over the rest of the year. …
21st May 2025
We see dimmer prospects for oil prices over the next year or so. But we think that will keep being a sideshow for US equity and bond markets. Admittedly, there has been a sizeable effect on the share prices of US energy companies in general, which is …
20th May 2025
The decision by Moody’s to downgrade the US government’s credit rating highlights that there are several potential storm clouds on the horizon for Treasuries, even if the downgrade itself doesn’t seem so far to have made much of a market splash. …
19th May 2025
There are still a few signs of stress in US financial markets. That’s despite this week’s ongoing rebound in the S&P 500, which has taken it well above its level on “Liberation Day”. It reflects the fact that investors have more to worry about than just …
16th May 2025
We think the recent “bear flattening” of the US Treasury yield curve has a bit further to run. The story in the Treasury market over the past few weeks has generally been one of bear flattening (short-end yields rising by more than long-end ones) as …
15th May 2025
On balance we suspect the US dollar will be positively correlated with the performance of the US stock market (i.e. it will have a “positive beta”) over the next year or so. But we don’t think that the greenback’s role as a “safe haven” is over for good, …
The rolling back of tariffs has coincided with a recovery in big tech in the US and China. (See Chart 1.) Their dual rally is something new since Donald Trump returned to the White House. We think there’s a good chance it will continue, despite the US …
14th May 2025
Despite the US-China truce, we still think inflationary pressures will prompt the Fed to stay pat for a while yet. But we doubt the 10-year Treasury yield will rise much more from here, even though investors are still pricing in rate cuts. That’s because …
13th May 2025
Global Trade Stress Monitor …
Just over a month ago, we ditched our long-held forecast that the S&P 500 would end this year at 7,000 , and revised it all the way down to 5,500. While that looks like it might have been a mistake, we aren’t inclined to re-adopt such a positive view. We …
12th May 2025
The US and China have each suspended for 90 days all but 10% of their Liberation Day tariffs and cancelled other retaliatory tariffs. This is a substantial de-escalation. However, the US still has much higher tariffs on China than on other countries and …
Thanks to continued optimism over prospective trade deals to reduce US tariff rates, asset markets have generally recouped most of their losses after the 2 nd April tariff announcement. That said, we think that the boost from further trade negotiation …
9th May 2025
We still think investors are expecting too many Fed cuts over the remainder of this year, and our base case remains that Treasury yields will rise and the US dollar will strengthen. The Fed struck a very cautious tone in Wednesday’s policy statement, and …
8th May 2025
We expect government bonds in China to continue to perform well against a backdrop of looser monetary policy, but suspect its currency won’t depreciate as much against the greenback as we had previously envisaged. Meanwhile, we have mixed feelings about …
7th May 2025
We see a few reasons to be sceptical about the chances of a broad-based upwards revaluation of Asian currencies, despite recent moves. At the time of writing the breakneck rally in Asian currencies vs. the US dollar seemed to have come to a screaming …
6th May 2025
The stronger-than-expected April US Employment Report published today leaves us comfortable with our central scenario that the trade war won’t be enough to tip the US economy into recession. So, we think the Fed will keep its focus on inflation and stand …
2nd May 2025
Despite the Bank of Japan’s dovish tone today we think it won’t be long before JGB yields start to rise again. And even though concerns about Japanese capital repatriation have seemingly been back on investors’ minds lately, we don’t think higher JGB …
1st May 2025
We think the recent outperformance of euro-zone equities over US ones has run its course. The eight-day winning streak in the S&P 500 may break today, after the market opened down over 1% on news that the US economy unexpectedly contracted in Q1 , on …
30th April 2025
The US stock market and the dollar have fared worse over the last hundred days than they fared during the first hundred days of all other presidential terms since 1980. What’s more, there has been an intervening rout in the Treasury market. It is hard to …
29th April 2025
Financial markets have staged a robust recovery over the past couple of weeks, even if they are for the most part not quite back to square one after the post-2 nd April turmoil. Given the ongoing uncertainty around US trade policy and the economic outlook …
28th April 2025
We suspect the US dollar will recover some lost ground over the coming months as its usual relationship with rate differentials reasserts itself. Seemingly dovish comments from Fed speakers, including Fed Governor Christopher Waller and Cleveland Fed …
25th April 2025
Despite further encouraging headlines on tariff reduction, a relief rally in Asian markets trading today has been notable by its absence. This reinforces our view that further gains in equity markets will become harder from here. Two stories broke on …
24th April 2025
Both US equities and government bonds have staged a relief rally over the past 24 hours, as concerns about Fed independence and the trade war have eased. But the fact that the rally was sparked largely by conciliatory remarks from US President Trump – …
23rd April 2025
Fears over the independence of the Fed can now be added to the growing list of things troubling investors. Market moves over the past couple of days shed some light on the likely market consequences of any attempt by President Trump to ouster Fed Chair …
22nd April 2025
Policymakers at the ECB appear to agree with us that risks to growth and inflation are increasingly skewed to the downside, supporting our view that the 10-year German Bund yield will stay around its current level and that the euro will give back some of …
17th April 2025
Our base case is that the turmoil across financial markets in the wake of President Trump’s “Liberation Day” announcement will continue to stabilise. As such, we assume that most asset prices and the dollar will recover some ground, with equities faring …
We think China will continue to allow the renminbi to weaken, perhaps all the way to 8.0/$ . Today’s market moves in China emphasise yet again how US trade policy remains the key driver of financial markets right now. Despite a stronger-than-expected Q1 …
16th April 2025
While the dust from the market sell-off continues to settle, there are few signs that the turmoil in equity and sovereign bond markets has sparked broader instability or a self-reinforcing downward cycle. Our base case is that market conditions will …
15th April 2025
The market turmoil sparked by the tariffs announced by US President Donald Trump on “Liberation day” has somewhat eased in the past couple of trading days. Absent further bad news, we think the worst has probably passed for US markets, although we see …
14th April 2025
China’s tit-for-tat retaliation in its rapidly escalating trade war with the US exerted some renewed pressure on equities and the dollar today, with bonds still buffeted by expectations of monetary easing and signs of market dislocation. Our base case …
11th April 2025
US President Trump’s decision to pause the implementation of many of his previously announced tariffs has sent markets – especially equities – soaring, but there are some risk premia remaining that might take longer to fade. We’d flagged only on Monday …
10th April 2025
US Treasuries are not benefitting from market turmoil, and we suspect they will keep struggling. Today, China announced that it would charge an additional 84% tariff on imports from the US starting on Thursday. Unsurprisingly, equity markets didn’t take …
9th April 2025
While gold prices have edged down since “Liberation Day”, this is not unusual during a sudden equity market selloff. In fact, gold’s track record suggests that prices are likely to rise from here, especially if a worst-case scenario for the US economy and …
We think the turnaround in longer-dated Treasury yields has bit further to run, if – and it’s a big if – the worst is now over for the US stock market. One reason for the volte-face in bonds is second thoughts about the prospects for Fed policy after …
8th April 2025
The carnage in global equity markets has continued after President Trump doubled down on his tariff plans, noting that “sometimes you have to take a medicine to fix something”. We still think he will lower the dosage by paring back his tariffs. But, if he …
7th April 2025
It’s not often that the US Employment Report is a sideshow. But that’s been the case today, as the ongoing fall-out from Donald Trump’s swingeing “reciprocal” tariffs and China’s strong response to them have had a bigger effect on the markets. Admittedly, …
4th April 2025
We hosted two online Drop-In sessions on 3 rd April to discuss the fallout from President Trump’s Liberation Day tariff announcement. (See a recording here .) This Update contains answers to some of the questions that we received and links to several more …
3rd April 2025
Markets were roiled after Trump announced “Liberation Day” tariffs that were clearly bigger than many (including us) had expected. (Our first thoughts on the economic implications in general are here , and we have already written about the implications …
Volatility in the US stock market hasn’t picked up sharply since Donald Trump returned to the White House, despite a very high degree of uncertainty about his economic policies. That may remain the case even after “Liberation Day”, judging by the …
2nd April 2025
Although US corporate credit spreads have taken their cue from US equities over the past couple of years, we don't think they will reach new lows even if equities reach new highs. The sell-off in US stocks that started on the 19 th Feb has been …
1st April 2025
While the recent outperformance of euro-zone stocks relative to US ones may have a bit further to run, we doubt European equities would hold up in absolute terms if US stocks fell much further. The renewed sell-off in the US stock market has added to its …
31st March 2025
The UK may have one of the most shielded economies against US tariffs. But stagflation and fiscal risks at home provide strong headwinds for its bond market. The UK is likely to get to the other side of US tariffs unscathed compared to other economies . …
28th March 2025
Equity investors have stopped ignoring US President Donald Trump’s tariffs announcements. We think they are right to do so. Donald Trump announced yesterday that all finished motor vehicle imports will be subject to a 25% tariff from next Thursday. This …
27th March 2025
In this Update, we answer several key questions about how the announced 25% tariffs on US imports of autos and parts might affect the global economy and the US itself. Mexico, Slovakia and Korea are most exposed with up to 1.6% of GDP at risk. But the …
We think China’s tech stocks could rally a bit further yet, and perhaps outperform those globally for a while. The breakneck rally in China’s tech stocks has come to a shuddering halt lately. Thanks to a couple of sharp falls they’ve now made no ground …
26th March 2025
While the drop and partial rebound in the US stock market over recent weeks has in many ways followed a familiar pattern, it has also seen some relatively unusual characteristics that point to the potential for a wider and sustained reset in financial …
25th March 2025
