UK

The UK economy is more resilient than was feared last year. While this will not help UK stocks, the Footsie’s long term prospects are appealing.

Great Power Rivalry is taking another leg up as Russia and China further align their geopolitical interests. Investors should stay long USD-CNY, favor defensives over cyclicals, and markets like North America and DM Europe that have less exposure to geopolitical risk. 

Our Central Bank Monitors support the recent shift in tone from central bankers in Europe. Find out what it means for European fixed-income portfolio allocation.

Financial markets were taken on a wild ride between Wednesday and Friday of this week, with hugely important monetary policy meetings in the US, euro area and UK along with a rash of economic data. Despite all the news, noise and market volatility, the underlying message for monetary policy and bond yields in the US, euro area and UK is unchanged.

The ECB and the BoE provided a comforting signal to markets that the end of the respective tightening campaigns is coming before the summer. In the process, they are closing their hawkishness gap relative to the Fed.

This week’s Special Report goes over the structural problems facing the UK economy and our outlook for UK gilts and the sterling following turbulent moves in 2022.

While the housing downturn will be fairly mild in the US, it will be more severe abroad. Continue to favor bonds of countries whose housing fundamentals will limit rate hikes.

In this, our final report of a tumultuous year, we summarize our policy outlook for the “Big 4” central banks – the Fed, the ECB, the Bank of England (BoE) and the BoJ – and the associated bond market implications for 2023.