We would like to reiterate our forecasts for 2010, originally made in December 2009, having adjusted some of them slightly to take into consideration market moves over the last couple of weeks.
Please note that we have changed our outlook for long-term yields in the U.S. and to a smaller extent Europe. We believe now that there is a significant risk building up in the Treasury market and we think it is likely that we get disappointing results from upcoming Treasury auctions, which will tend to drive long-term rates up.
We expect this situation to get worse in coming quarters and think it is not unlikely that we will see 10-year Treasury bond yields to go up by 200bp in the next 18 months. Normally increasing yields are positive for a currency, however, in this case it would make a structural problem very obvious and therefore be very U.S. dollar negative.
- Global growth to normalize at around 4% GDP, mainly driven by growth in emerging markets
- Equity markets to rise another 10%-20% in coming months due to increased corporate profitability and operating leverage
- Re-pricing of risk in bond markets, especially sovereign debt
- Short-term rates to remain low for another few months but to rise strongly later in the year
- Long-term rates to move higher, with increased risk to the upside in the event of disappointing treasury auctions and rising inflation (not before 2011)
- Inflation to remain low but to rise more significantly in 2011
- Energy prices to move higher with oil breaking USD 100/barrel in the first half of 2010
- Soft commodities to move sharply higher with upside potential of 30%+ in 2010
- Gold to consolidate after strong upward move, trading in narrow range in Q1/2010
- Gold to continue upward trend in second half of 2010
- U.S. dollar to move lower, despite temporary upward bounces