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Global Markets

Global Markets Update

Challenges ahead for Brazil’s stock market

Brazil’s stock market has fared better than most this year, but we forecast it to fall ~15% over the rest of 2022. And while we expect it to rebound over the following couple of years, we think falling commodity prices and mounting fiscal risks will limit the scale of its rally.

12 August 2022

Global Markets Update

Central bank “pivots” and the recent equity market rally

The anticipation of quick reversals of central bank rate hikes has probably supported equity markets of late, but we suspect investors have become overly optimistic and still think equity prices will end this year, in general, below their current levels.

12 August 2022

Asset Allocation Update

Answers to your questions on global markets

We held a Drop In yesterday outlining our latest forecasts for global financial markets. This Update answers some questions that we received during that Drop In but didn’t have time to address. In view of the wider interest, we are also sending this Asset Allocation Update to clients of our Global Markets and FX Markets Services.

10 August 2022

Our view

We expect further rises in global government bond yields and renewed falls in equity prices over the coming year. Government bond yields have typically peaked only shortly before the ends of central bank tightening cycles and we expect most major central banks to raise rates significantly over the remainder of this year. We think the increase in government bond yields, as well as a slowdown in global economic growth, will keep risky assets, such as equities and corporate bonds, under pressure. We also expect the worsening risk environment as well as aggressive tightening by the Fed to result in further US dollar appreciation.

Latest Outlook

Global Markets Outlook

We think the latest asset price rallies will prove short-lived

We doubt the recent rallies in global bond and equity markets will be sustained over the remainder of the year. While we no longer think the 10-year US Treasury yield will exceed its June peak, we still expect it to rise as the Fed delivers a bit more tightening than investors now seem to anticipate. And we think government bond yields elsewhere will increase for similar reasons. We expect that, combined with a deteriorating economic backdrop, to place renewed pressure on “risky” assets; we forecast major benchmark equity indices – in both developed and emerging markets – to fall further this year, and expect corporate bond spreads to widen. But next year we think both “safe” and risky assets will fare a bit better, as central banks transition to easing mode and the economic backdrop starts to improve.

3 August 2022