Equity Research

Global Strategy Paper: Bear Market Anatomy – the path and shape of the bear market

Most equities have entered (or are on the cusp of) a bear market, not all of which are the same. The type of bear market has some bearing on the triggers, timing and speed of the recovery. We would argue that we are in an event-driven bear market (triggered by tariffs). However, it could easily morph into a cyclical bear market given growing recession risk. The average falls of around 30% are similar for both event-driven and cyclical bear markets, while they differ in terms of duration with event-driven downturns being shorter with a faster recovery profile.

8 April 2025 | Research | Portfolio Strategy - Peter Oppenheimer and others
 

Also see: Europe equities and the US Bear: We take down our STOXX Europe EPS growth to -7% and +0% for 2025 and 2026 (from 2% and 4%)

Global Markets Comment: After the Tariffs—Still Room to Price Recession

If the tariffs go into effect as announced, our US economists will likely move to a recession baseline forecast. Despite the large shift already in cyclical pricing, our "growth benchmarking" exercises suggest that the market is still not priced for an average recession.

8 April 2025 | Research | Economics - Dominic Wilson and others
 

US: Countdown to Recession 

We are lowering our 2025 Q4/Q4 GDP growth forecast to 0.5% and raising our 12-month recession probability from 35% to 45% because of tighter financial conditions, foreign consumer boycotts, and a continued spike in policy uncertainty. This baseline forecast still rests on our standing assumption that the effective US tariff rate will rise by 15pp in total, which would now require a large reduction in the tariffs scheduled to take effect on April 9.  If these tariffs take effect, we expect to change our forecast to a recession.

6 April 2025 | Research | Economics - Jan Hatzius, David Mericle, Alec Phillips, Ronnie Walker and others

  Research Unplugged: Macro Update: Countdown to Recession

With Alec Phillips, Jan Hatzius, Dominic Wilson, Kamakshya Trivedi, David Kostin, Lotfi Karoui and Allison Nathan

Also see: US Economics Analyst: The Impact of Uncertainty on Investment, Hiring, and Consumer Spending (Rindels / Abecasis / Mericle)

China: Incremental GDP impact from potentially another 50% Trump tariff

China's retaliatory tariff of 34% on US goods, a response to US “reciprocal” tariffs, triggered a threat from President Trump to impose an additional 50% tariff if China does not withdraw its retaliatory tariff. Further statements from the Chinese government point to escalating trade tensions. Our analysis suggests an initial 50% tariff (which is roughly how much President Trump has imposed on China so far this year) would decrease Chinese GDP by 1.5pp. A second 50% tariff, however, would have a diminished impact, reducing GDP by only another 0.9pp.

8 April 2025 | Research | Economics - Andrew Tilton and others
 

Also see: China: PBoC allows more flexibility on USD/CNY fixing on tariff escalation

Tariffs and the Dollar: Why We Flipped Our View

We have made a major shift in our Dollar view after seeing the developments of the last few weeks and rethinking the likely implications of these policy changes. We now expect recent Dollar weakness to persist, particularly in DXY terms. First, the combination of an unnecessary trade war and other uncertainty-raising policies is severely eroding consumer and business confidence. Second, negative trends in US governance and institutions are eroding the appeal of US assets for foreign investors. Third, rudimentary calculations and a constant back-and-forth makes it difficult for investors to price outcomes other than high uncertainty.

8 April 2025 | Research | Economics - Michael Cahill and others
 

Replay: The USD Outlook

Global Markets Daily: Playing Defense in Credit

We investigate the risk-reward from going up in quality and keeping duration high relative to shortening duration and going down in quality. We find that adding spread via duration is preferable vs. lower quality names given the risks skew towards spread decompression.

8 April 2025 | Research | Economics - Shamshad Ali

Also see: Credit Notes: Before Day 3: Steady microstructure (for now), but lingering spread widening

US Daily: Tracking Tariffs

President Trump announced a “reciprocal” tariff plan on April 2. After incorporating the newly released product list, we estimate that the “reciprocal” tariff package would raise the US effective tariff rate by about 11.5pp if the package takes full effect on April 9. This and other tariffs announced since the beginning of the year would together push the US effective tariff rate from 2.5% to over 20%, and potential sectoral tariffs would pose additional upside risks to this estimate.

8 April 2025 | Research | Economics - Jan Hatzius and others

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