Japanese Yen

This Insight looks at the likely direction of bond yields and the dollar, from the lens of money velocity.

This report looks at the likely path for the dollar and bond yields over the next 6-to-12 months.

After resisting the consensus narrative in 2022 that a US recession was imminent, and then predicting an immaculate disinflation for 2023, the Global Investment Strategy team has joined the dark side and is now expecting a recession to start in the US within the next six months. Accordingly, we recommend that investors underweight stocks and overweight government bonds.

In this report, we argue that the Bank of Japan is unlikely to hike interest rates this week, but the relative trajectory of bond yields in Japan is higher. This warrants an underweight position in JGBs and a leveraged bet on a higher yen. The positioning for equity investors is murkier, as progress on corporate reforms is necessary for a rerating in Japanese shares. That is not yet very clear. The bottom line is: Stay long the yen.

This report looks at the latest developments in G10 economies and implications for bond and FX market strategy.

Even after the Fed cuts rates, policy will remain restrictive for some time. Moreover, in history, stocks have tended to fall around the first rate cut. We remain cautious on the outlook for the economy and risk assets.