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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
February 27, 2025
February 17, 2025
Reciprocal Tariffs and Reducing Bilateral Trade Imbalances
February 17, 2025 10:28 AM UTC
· President Trump’s executive order on reciprocal tariffs has not produced much market reaction, both as the proposals will not be delivered to the president until April 1 and the process of Commerce/U.S. Treasury and Homeland Security input is seen reducing the odds of penal tariffs.
February 12, 2025
Japan With/Against Trump?
February 12, 2025 6:11 AM UTC
As Donald Trump pressure other countries with his tariff tactics, every country, even U.S. allies, are trying to figure out whether they should retaliate or comply. Japan, as a long term U.S. ally, is of no exception but they seem to have taken a different path than Canada when dealing with Trump. I
February 11, 2025
Trump’s Tariffs: Steel Then Reciprocal and Then Cars
February 11, 2025 1:23 PM UTC
The 25% Steel and Aluminum tariff could have small to modest adverse inflation and GDP growth impacts on the U.S., but the prospect of reciprocal and more product and country tariffs create trade policy uncertainty/supply chain disruption and paperwork problems. This could amplify the impact of
Europe’s Gas Problem Again?
February 11, 2025 8:30 AM UTC
The ECB staff forecasts on March 6 will be revised upwards for 2025 and 2026, due to the surge in wholesale gas prices. However, the ECB will likely take the view that 2 round effects from higher gas prices on balance are unlikely to boost core inflation (especially given wage tracker softness) an
February 10, 2025
Markets and Trump’s Early Days
February 10, 2025 7:55 AM UTC
The early days of the new Trump administration has seen lots of volatility around the on-off tariffs with Canada and Mexico, but the more stable U.S. Treasury market has helped provide an anchor. U.S. Treasuries have shift towards the view that the 10yr budget bill will be delayed until H2 and
February 06, 2025
Fixing The U.S. Trade Deficit
February 6, 2025 2:30 PM UTC
New U.S. trade deals will likely make slow progress in reducing bilateral trade deficits as the underlying drivers behind the U.S. trade deficit are macro forces. While the U.S. economy outperforms other major trading partners; the value of the USD remains overvalued and as long as tariffs are
January 29, 2025
January 24, 2025
January 23, 2025
Trump and Markets
January 23, 2025 2:16 PM UTC
Global markets will be driven by policies and current valuation in 2025, especially new Trump administration policies. Trump could jawbone markets for a lower value of the USD and lower oil prices, which could have a temporary modest impact (joint US/Japan FX intervention is possible) but the stru
January 20, 2025
January 07, 2025
January 06, 2025
Markets 2025: A Tale of Two Halves
January 6, 2025 8:10 AM UTC
· For financial markets, 2025 will likely be a game of two halves. US exceptionalism will likely drive US equities to extend outperformance in H1, while the USD rises further as tariffs (threats and actual) escalate. However, 10yr U.S. Treasury yields will likely push higher in H2, which can
December 30, 2024
December 24, 2024
December Outlook Webinar on Jan 7: The Trump Effect- Tariffs, Fiscal Shifts and Geopolitics
December 24, 2024 8:30 AM UTC
The U.S. economy’s momentum remains reasonable before the impact of President-elect Trump’s policies in 2025 and 2026. While high uncertainty exists on the scale and timing of policy, the strategic bias is clear – sizeable tax cuts that will boost the budget deficit; tariffs (threats
December 20, 2024
Japan Outlook: Lukewarm Japan and BoJ
December 20, 2024 12:00 AM UTC
· Due to the slow recovery in consumption, 2024 GDP has been revised lower to -0.5%. Private consumption will continue to grow throughout 2025/26 gradually as business price/wage setting behavior gently shift and Japanese consumers adapting to higher inflation. Wage growth in 2025 wil
December 19, 2024
DM Rates Outlook: Policy and Spread Divergence
December 19, 2024 12:07 PM UTC
• 2yr U.S. Treasury yields can decline initially as the Fed finishes easing (Figure 1), but as the sense grows that the rate cut cycle is stopping, we see the 2yr swinging to a small premium versus the Fed Funds rate – as the market debates the risks of a future tightening cycle. For 10y
Outlook Overview: The Trump Effect- Tariffs, Fiscal Shifts and Geopolitics
December 19, 2024 9:25 AM UTC
· The U.S. economy momentum remains reasonable before President elect Trump’s policies impact in 2025 and 2026. While high uncertainty exists on the scale and timing of policies, the strategic bias is clear – sizeable tax cuts that will boost the budget deficit; tariffs (threats