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July 03, 2025
U.S. Assets and Valuation
July 3, 2025 9:30 AM UTC
The U.S. equity market has returned to be clearly overvalued on equity and equity-bond valuations measures and is vulnerable to a new correction in H2 on any moderate bad news (e.g. further economic slowing and corporate earnings downgrades). In contrast, U.S. Treasuries are at broadly fai
July 02, 2025
DM Central Banks: Overlooking Lagged 2021-23 Tightening and QT?
July 2, 2025 8:30 AM UTC
We are concerned that DM central banks are underestimating the lagged impact of 2021-23 tightening and ongoing QT, which impacts the transmission mechanism of monetary policy. Central banks need to consider cyclical and structural issues, but also need a more rounded view of the stance and implica
July 01, 2025
Trump Tariffs: Poker Face?
July 1, 2025 12:55 PM UTC
Our central scenario (but less than 50%) is towards a scenario of compromise, with some agreements in principle or trade framework deals, delays for most other negotiating in good faith but with one or two countries seeing a reciprocal tariff rise e.g. Spain and/or Vietnam. This could still be fol
June 30, 2025
U.S. and Asia Defense Partners
June 30, 2025 7:30 AM UTC
· Japan, S Korea and Australia could eventually agree to some extra commitment to increase (self) defence spending in the next 5-10 years though perhaps not targets like NATO countries. This could come as part of the trade deal negotiations currently underway. Japan and S Korea
June 26, 2025
June 25, 2025
Outlook Overview: Trump’s Fluid Policies
June 25, 2025 7:20 AM UTC
· President Donald Trump still wants to use the tariff tool, and we see the eventual average tariff rate being in the 13-15% area, lowered by deals but increased by more product tariffs. Any lasting legal block on reciprocal tariffs will likely see the administration pivoting towards ot
June 24, 2025
Equities Outlook: Choppy Then 2026 Gains
June 24, 2025 8:15 AM UTC
Though the U.S. equity market has rebounded, we still scope for a fresh dip H2 2025 to 5500 on the S&P500 as hard data softens further to feed into weaker corporate earnings forecasts and CPI picks up and delays Fed easing. However, the AI story is still a positive, while share buybacks
June 23, 2025
DM Rates Outlook: Yield Curve Steepening?
June 23, 2025 8:30 AM UTC
• We see the U.S. yield curve steepening in the next 6-18 months. 2yr U.S. Treasury yields can step down with cautious Fed easing on a modest/moderate growth slowdown and also if the Fed keeps an easing bias in H2 2026. 10yr U.S. Treasury yields face a tug of war between lower short-dated y
Japan Outlook: Hot Inflation Partially Transitory
June 23, 2025 3:00 AM UTC
· Growth in private consumption remains sluggish in Q1 2025 on negative real wages. Wage hike in 2025 so far looks little affected by U.S. tariffs and should remain above 2% for the rest of 2025. The subtle change in business price/wage setting behavior will be supportive for consum
June 17, 2025
BOJ QT And Steeper Yield Curve
June 17, 2025 8:41 AM UTC
Despite the slowdown in the pick-up in BOJ QT, monthly bond purchases are set to slow from Yen4.1trn pm to Yen2.1trn pm by Q1 2027. With bond maturities BOJ QT is getting bigger and will mean that supply pressures continue to drive yield curve steepening. We see 1.85% 10yr JGB yields by end 2025
June 12, 2025
Trump Tariffs: China and July 9 Reciprocal Deadline
June 12, 2025 7:17 AM UTC
We attach a 65% probability to a U.S./China reaching a new trade deal that reduces the minimum overall tariff to 15-20% imposed by the U.S., most likely agreed in Q4 2025 and to be implemented in 2026. However, a 35% probability exist of no deal and this could eventually mean higher tariffs (Fig
June 03, 2025
Nato Summit 5% Target and Trump
June 3, 2025 10:48 AM UTC
Trump’s natural instincts will likely see extra pressure applied on Europe in the coming weeks to commit to 5%, but we do not see existential threats from Trump. In the end, our baseline is that NATO will agree a “soft” aim of 5% (3.5% hard military spending and 1.5% infrastructure/cybersecu
June 02, 2025
Trump’s 50% Steel And Aluminum: Negotiating Leverage?
June 2, 2025 7:42 AM UTC
• President Donald Trump increase in steel and aluminum tariffs from 25% to 50% is not just about boosting the steel and aluminum industry. It also a demonstration that Trump remains in control of tariffs and can aggressively change tariffs to increase negotiating leverage. It is a mess
May 30, 2025
Tax Foreigners Assets: How To Lose Friends
May 30, 2025 9:12 AM UTC
Increasing taxes on dividends on U.S. equities and corporate bond coupons would alarm foreign investors and hurt the USD and U.S. equities, as it would amplifies foreign investors concerns that they are overweight U.S. assets and the USD. Starting a capital war with investors into the U.S. is
May 29, 2025
Court Stops Trump Reciprocal and Fentanyl Tariff
May 29, 2025 7:18 AM UTC
• The Trump administration will likely follow a multi-track response by appealing the judgement but also fast-tracking section 232 product tariffs for pharmaceuticals and semiconductors. The administration could also consider section 301 or 122 tariffs (the latter 15% for 150 days against c
May 27, 2025
May 26, 2025
Likely U.S. Tariff Scenario for Japan
May 26, 2025 5:36 AM UTC
After the U.S.-UK trade deal announcement, most countries are looking forward to lower tariffs. U.S.-Japan high level remarks are so far positive but lack concrete commitment. The U.S. has said that 10% tariff will be a baseline and we do not see Japan to be an exemption. However, we have a likely t
May 13, 2025
Markets: Less U.S. Recession Risk, But Trade Headwinds
May 13, 2025 9:38 AM UTC
Though we had expected a U.S./China trade truce, the terms are more favorable to U.S. growth than we anticipated. Combined with the UK framework deal, we have revised down the probability of a U.S. recession from 35% to 20%. In turn we have revised up the end 2025 and end 2026 S&P500 forecasts t
May 12, 2025
Trump Tariffs: China and UK Precedents
May 12, 2025 8:02 AM UTC
The U.S./China have announced major reductions in reciprocal tariffs to 10% with other measures postponed for 90 days. Though the U.S. is still imposing an extra 20% due to fentanyl, China will likely make some moves that could also help to reduce this. This is in line with our previous thinki
May 09, 2025
Household Divergence Into the Downturn?
May 9, 2025 10:55 AM UTC
Overall, the shock faced by the U.S. from tariffs is a negative supply shock, which can then be followed by job losses and restrained income and consumption growth. This 2 round can be amplified if a hard landing is seen and quickens job losses, which would really hurt low income households. Howev
May 06, 2025
Tariff Man
May 6, 2025 8:45 AM UTC
With the U.S. equity market having rebounded, President Donald Trump instinct on tariffs have seen threats of pharma tariffs and a 100% tariff on non U.S. films. Slow progress is also reported on bilateral deals, despite White House PR spin. However, Trump will see pressure rising from three so
May 05, 2025
Markets: China Truce Hopes and More Data
May 5, 2025 8:05 AM UTC
The direction of travel is towards a U.S./China truce followed by postponing/cancelling most reciprocal tariffs and then trade negotiations. While the markets could cheer this as good news, incoming economic data in May and June is the most critical issue. We still see the U.S. imposing an average
May 01, 2025
April 30, 2025
China South China Sea Tensions
April 30, 2025 10:30 AM UTC
We see recent China activity as part of the normal grey warfare for long-term influence in the South China sea. It has involved the use of China coastguard and militia fishing boats rather than China PLA Navy, though the risk of escalation between the Philippines and China remains. China likely wa
April 29, 2025
April 28, 2025
April 23, 2025
Trump Under Pressure
April 23, 2025 7:15 AM UTC
A deteriorating economic; volatile financial markets and weakening approval ratings are all putting pressure on the Trump administration to do trade deals. However, Trump instincts means he still likes tariffs, while negotiations will not be quick with China restraints and non-tariffs list desired
April 22, 2025
Foreign Official U.S. Treasury Holders: The Kindness of Strangers
April 22, 2025 7:30 AM UTC
Official holdings of U.S. Treasuries show a mixed picture with China, Brazil and Saudi Arabia well off peak holdings. Two drivers of some of these country flows are the peak in global central bank FX reserve holdings in 2021 and an increased holdings of other currencies in the last decade. Neverth
April 17, 2025
Safe Havens Other Than the USD
April 17, 2025 8:30 AM UTC
The USD and U.S. Treasuries are currently not acting like safe havens, as the crisis is U.S. centric with the tariff debacle. 10yr Treasuries can regain safe haven status if a U.S. recession occurs, but U.S. equities are still clearly overvalued versus equity and equity-bond metrics. We prefer Ind
April 15, 2025
Nervous U.S. Long Term Asset Holders
April 15, 2025 8:30 AM UTC
Overall, foreign equity investors can no longer count on U.S. exceptionalism and could face lower long-term corporate earnings growth, which at a minimum will likely slow net inflows. Bond investors also face ongoing policy volatility, which likely means a need for an extra risk premium – t
April 14, 2025
Trump's Tariff Impact for Japan and BoJ
April 14, 2025 4:28 AM UTC
With the latest round of "universal" tariff, Japan is being hit again by double digit tariffs despite being the nice ally of the U.S. While we see little change of Japan's retaliation, it is worth looking into the impact towards the Japanese economy as auto export that is hit hard, is one of the maj
April 10, 2025
Trade Deals with the U.S.: Pressures and Obstacles
April 10, 2025 7:17 AM UTC
Pressures to do trade deals include the weaker U.S. economy and higher inflation when it arrives/foreigners becoming nervous of their USD30trn plus holdings of U.S. securities and more crucially risks to Trump and GOP approval ratings from Republican voters. Obstacles to quick trade deals include Tr
April 08, 2025
Reciprocal Tariffs: The Hit To Other Countries
April 8, 2025 9:30 AM UTC
Overall, we are still assessing the effects on non U.S. countries from the tariffs being imposed by the U.S. via direct trade/business investment/currency and financial & monetary conditions swings. The impact will be adverse to GDP, but for some major countries could be less than the U.S. How
April 03, 2025
Tariffs: Inflation may be the biggest worry for the U.S.
April 3, 2025 4:12 PM UTC
While surprising the market in their intensity, Trump’s “reciprocal” tariffs were in line with previous threats on most countries, and with Canada and Mexico being treated less harshly that feared, the net surprise is modest to us. However we do feel that inflationary risks have increased furt
April 02, 2025
Taiwan: Grey Warfare or More?
April 2, 2025 7:05 AM UTC
China grey warfare against Taiwan will continue, but we would only see a 5% probability of China invading Taiwan in 2025 and 2026. The U.S. is pivoting towards Asia and China, while President Trump is not China friendly. A war with the U.S. over Taiwan would be very costly in military and eco
March 31, 2025
U.S. Trade Surplus Countries: No Special Treatment?
March 31, 2025 9:04 AM UTC
Quick dilutions of tariffs or exemption will likely be slow in coming for countries that the U.S. has trade surpluses with, as the Trump administration are currently more focused on tariffs for tax revenue and trying to switch production back to the U.S. than trade deals. Trade policy uncertainty
March 28, 2025
March 27, 2025
Car Tariffs Then Lenient Reciprocal Tariffs?
March 27, 2025 8:59 AM UTC
The 25% tariffs on cars underlines that tariffs are not just about getting better trade deals, but in Trump’s view raising (tax) revenue and trying to shift production back to the U.S. Combined with other tariffs being implemented, plus policy uncertainty, we see a moderate overall hit from t
March 26, 2025
Outlook Overview: Navigating the Turbulence
March 26, 2025 9:30 AM UTC
· More tariffs will arrive from the U.S. from April with product (car, pharma, semiconductors and lumber) and reciprocal tariffs. President Trump has a 3-part approach to tariffs to raise (tax) revenue; bring production back to the U.S. and get fairer trade deals. This means some of t
Equities Outlook: Turbulence Ahead
March 26, 2025 9:05 AM UTC
· U.S. trade wars will likely hurt U.S. growth and raise inflation, with only small to modest Fed easing and a 10yr budget bill that will likely be neutral to negative for the economy. With valuations still very high (Figure 1), we see scope for a correction to extend into mid-year th
March 25, 2025
Japan Outlook: Inflation Sustainably Above 2%?
March 25, 2025 10:00 AM UTC
· Private consumption will have a modest growth in 2025 along the gradual change in business price/wage setting behavior before slowing to average in 2026. Wage hike in 2025 looks to be at least on par with 2024 after early result of the spring wage negotiation. SMEs are going to be
DM Rates Outlook: Policy Divergence
March 25, 2025 9:30 AM UTC
• 2yr U.S. Treasury yields can step down with cautious Fed easing on a modest/moderate growth slowdown and also if the Fed keeps an easing bias. 10yr U.S. Treasury yields can be helped by this easing and see a move down through 2025. However, the budget deficit will likely be 6.5-7.0%
March 21, 2025
Trump Product and Reciprocal Tariffs
March 21, 2025 9:00 AM UTC
It appears that we will get bad news from April 2 on extra tariffs before any good news. Firstly, the announcement effect of tariffs for many countries and extra products will hurt U.S. business and consumer sentiment. Secondly, part of the reason for tariffs is extra tax revenue and to try to s
March 18, 2025
March 10, 2025
Trump and Dollar Policies
March 10, 2025 6:04 AM UTC
The Trump administration could decide to more broadly talk the USD down or less likely try to reach a cooperative Mar A Lago accord with big DM and EM countries. A more cohesive alternative is a forced currency deal for countries to appreciate their currencies to avoid more tariffs and withdraw
March 04, 2025
Japan: "Nimble" JGB Intervention, but not now
March 4, 2025 12:00 AM UTC
As JGB yields edged higher on BoJ's further tightening, Japanese officials and BoJ members are voicing their concern over its potential impact. The BoJ has suggested "nimble" response to JGB market volatility after they removed Yield Curve Control last year but we think we will not see any response