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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 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 24, 2025 3:45 PM UTC
• The U.S. economy, consumer spending in particular, ended 2024 looking healthy, but with inflation still above its 2.0% target if well off its highs. The Trump administration’s more aggressive than expected trade war has made a return to the inflation target more difficult and raised dow
February 20, 2025 8:03 AM UTC
It is highly likely in April that the U.S. will announce a 25% tariff on EU cars and pharmaceuticals (here) and also reciprocal tariffs against the EU. The majority could be implemented given Trump’s desire to raise revenue/dislike of the EU as well as negotiate trade deals. This
January 16, 2025 11:05 AM UTC
BOE QT is 3.4% of GDP and means the 2025 total funding is 8% of GDP, which helps explain part of the current pressure on gilt yields (here). This pace is unlikely to change before the BOE review in September 2025, but the QT is partial monetary tightening and will offset some of 125bps of BOE rate
January 14, 2025 8:15 AM UTC
The EUR real exchange rate is well above the 2014 low, while ECB officials are guiding that more rate cuts are coming. 2yr German yields are unlikely to rise much further and will likely come back down in Q2 (here). A January 30 ECB cut will likely build more easing expectations, though more of
January 10, 2025 8:10 AM UTC
· UK Gilts have been dragged higher by rising Treasuries and market concerns that BOE rate cuts will be limited (here), while 10yr Bund yields have also been dragged higher by Treasuries concerns on Fed rate cuts/budget deficit and tariffs. Multi quarter we see this as overdone. We
January 9, 2025 9:40 AM UTC
· 10yr Gilts yields are rising on concerns of UK fiscal slippage, but also higher U.S. yields and funding pressures as GBP100bln of BOE QT adds to the budget deficit targeted at 4.5% of GDP in 2024/25. Chancellor Reeves will likely recommit to the fiscal rules (ie further small correc
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
December 19, 2024 8:01 AM UTC
• The U.S. economy, consumer spending in particular, has continued to show surprising resilience, and is growing at a pace probably in excess of long-run potential near 2.0%. Inflation has fallen significantly from its highs, with core PCE inflation now running slightly below 3.0%, but rema
December 18, 2024 10:05 AM UTC
· The glory days of exceptionalism for U.S. equities will likely extend in Q1 2025 to bring the S&P500 to 6200-6300. The problem is that valuations have now become stretched with S&P500 ex magnificent 7 on a forward P/E of 19 and valuations out of line with real bond yields (Figure 1)
December 16, 2024 6:19 PM UTC
Trump’s tariff threats are being felt in Canadian politics, with Finance Minister Chrystia Freeland’s resignation, due to disagreements with Prime Minister Justin Trudeau’s plans to give the economy fiscal support, with Freeland preferring to “keep the powder dry” given the risks Canada fa
September 30, 2024 9:26 AM UTC
The most likely scenarios between Israel and Hezbollah are Israel/Hezbollah intermittent attacks/counterattacks (40%) or significant ground invasion Southern Lebanon (45%). Both would be difficult in human terms and raise geopolitical tensions, but are unlikely to cause a lasting impact on global
September 24, 2024 9:00 AM UTC
• For U.S. Treasuries, we see 2yr yields coming down further on our baseline soft landing view, as the Fed moves consistently to a 3.00-3.25% Fed Funds rate. However, with considerable Fed easing already discounted, 2yr yield decline should be modest and 2yr yields should bottom mid-2025. 1
September 24, 2024 8:30 AM UTC
• We now forecast 5450 for the S&P500 for end 2024, but could see a move to 5200/5000 in the next 3-6 months as volatile data keeps the soft v hard landing debate alive. On our baseline of a U.S. soft landing, we would see the S&P500 at 5600 by end 2025. The tech sector is still really i
September 23, 2024 2:16 PM UTC
• The U.S. economy is showing clear signs of labor market slowing which poses downside risks to the still impressive resilience of consumer spending, which has sustained healthy GDP growth through Q2 2024. We expect GDP growth below potential in the second half of 2024 and the first half of
August 26, 2024 8:02 AM UTC
The probability of an Israel/Hezbollah war in the next 12 months has move up from low to modest probability, but would be a high impact event geopolitically and for global markets. For global markets, a distinction would be drawn between an Israel/Hezbollah war that did not involve Iran/U.S. and o
August 23, 2024 2:38 PM UTC
Fed Powell clearly signaled a Sep 18 FOMC cut, but his analysis on the economy is softer than harder landing. Though the option of 50bps was not ruled out, the comments from Powell and other Fed officials are more consistent with 25bps than 50bps. Nevertheless, the Fed is now more focused on
August 19, 2024 8:15 AM UTC
2yr U.S. Treasury yields can fall gradually by end 2025 to 3.25%, as a more neutral Fed Funds era is discounted. 10yr yields ability to decline on a soft landing is more difficult, given high net supply facing the market. We also remain concerned that the U.S. will see some temporary fiscal stre
August 13, 2024 12:22 PM UTC
• We see the recent market turbulence as being partially a reduction in risky positions. However, the U.S. economy is slowing and triggering a debate about a soft or harder landing (we see slowing rather than recession in our baseline), while EZ data shows the recovery is not gaining moment
July 12, 2024 9:37 AM UTC
Different economic and inflation dynamics, plus no constraint from trade weighted exchange rates, means that the ECB and BOE can cut irrespective of the Fed in the coming quarters. This can see 2yr yields decline, though less so in Germany where a 2.5% ECB depo rate is already discounted. 10yr y
June 25, 2024 7:05 AM UTC
• U.S. equities are overvalued and waiting for earnings growth to catch-up, which leaves the market choppy, directionless and vulnerable to intermittent 5% corrections. Our forecast slowing of the U.S. economy before Fed rate cuts or nervousness about the post-election prospects are potenti
June 24, 2024 8:45 AM UTC
• For U.S. Treasuries we see a steady easing process from the Fed from September, which can allow 2yr yields to fall consistently. However, the decline in H2 2024 will be slower at the long-end from traditional yield curve steepening pressures and then we see fiscal stress in H1 2025 unde
June 20, 2024 6:17 PM UTC
• The U.S. economy is starting to lose momentum after a surprisingly strong second half of 2023, and we expect the loss of momentum to become more apparent in the second half of 2024, causing a slowing in employment growth from its current strong pace. We expect inflation to resume a gradua
May 10, 2024 1:06 PM UTC
Fed easing expectations for 2025 and 2026 can shift from a terminal 4% Fed Funds rate towards 3%, as the U.S. economy slows due to lagged tightening effects. Combined with Fed easing starting in September this should mean a consistent decline in 2yr yields. However, 10yr U.S. Treasury yields wil
March 25, 2024 9:00 AM UTC
· In the U.S., a tug of war between momentum and U.S. exceptionalism on the one side versus valuations and any deviations from the U.S. goldilocks scenario now means volatility and a risk of a correction. We feel that the U.S. equity market recovery can push onto 5250 for the S&P5
March 22, 2024 10:00 AM UTC
• The U.S. economy has continued to see growth surprising to the upside supported in particular by consumer spending. While the momentum of the second half of 2023 will be difficult to sustain the economy now looks poised for a soft landing, with risk that continued resilience in the econom
January 10, 2024 2:00 PM UTC
We expect December CPI to increase by 0.2% overall and ex food and energy, with risk being for higher rather than lower, with our forecasts before rounding being 0.22% overall and 0.24% ex food and energy.
January 9, 2024 2:24 PM UTC
Bottom Line: The attacks on Red Sea shipping have already triggered a marked rise in freight costs, and more broadly than just for the Red Sea route. Thus has led to some worries about the possible fresh upside risks to what have recently been sharply falling CPI inflation rates. These worries a
January 3, 2024 10:30 AM UTC
Bottom Line: The full benefits of the latest AI wave will likely not kick in until the late 2020/early 2030’s.However, 5G over the last couple of years has been enabling more connectivity via the Internet of Things and allowing more big data analysis, including AI tools and algorithms. In the 2hal
January 2, 2024 5:03 PM UTC
We expect December CPI to increase by 0.2% overall and ex food and energy, with risk being for higher rather than lower, with our forecasts before rounding being 0.22% overall and 0.24% ex food and energy.
December 15, 2023 11:00 AM UTC
U.S. equities face a volatile Q1 2024, both because the Fed are unlikely to ease in Q1 and because a slowing economy hurts corporate earnings forecasts. With the market overvalued, a modest correction could be seen, though this would be sharper with a recession. Gains should resume with Fed ra
December 11, 2023 1:25 PM UTC
We expect November CPI to be unchanged for a second straight month, though ex food and energy we expect a 0.3% increase to follow October’s 0.2% rise. Before rounding however we expect a core rate of 0.26%, meaning that a second straight 0.2% rise is more likely than 0.4%.
December 10, 2023 2:32 PM UTC
Bottom Line: The Fed and ECB meetings are the most important for forward guidance this week, as they will set the tone for DM generally (BOJ is still seen to be a different phase and unlikely to have last impact on global DM government bond markets). The Fed will likely try to restrain the scal
December 7, 2023 12:46 PM UTC
We expect a 200k increase in November's non-farm payroll, stronger than October's 150k though excluding the impact of returning strikers the data will be consistent with a modest slowing. We do however expect a correction lower in the unemployment rate to 3.8% from 3.9% and a 0.3% rise in average ho
August 7, 2023 10:59 AM UTC
The ongoing conflict between Ukraine and Russia has been a global concern, with efforts continuously being made to find a peaceful resolution. In a recent development, Saudi Arabia hosted a summit in Jeddah last week that brought together top officials from around 40 countries, including key players