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Financial markets are in for turbulent times. We foresee substantial corrections for many asset classes, including EUR/USD and equity markets. However, in the long run, we wouldn’t be surprised if the S&P 500 index would manage to reach levels in the range of 5,000-6,000 and we expect a considerable weakening of the dollar. This report explains why.
The corona crisis may not have turned the world upside down, but it has at least made it dizzy. The pandemic coincides with a number of other trend breaks, new trends and other important developments that will strongly influence future global economic growth and prospects for financial markets.
The outlook for the euro is improving as EU countries have taken a more effective approach to deal with the coronavirus than the US and the EU recovery fund inspires more confidence in the stability of the Eurozone. What does this mean for EUR/USD?
Market sentiment towards EUR/USD is highly positive. As such, we reckon with a corrective retreat in the near-term. However, thereafter we foresee a further rise to above 1.20.
Our expectation is that long-term interest rates are currently staging a long-term bottoming out process and will rise significantly in the coming years..
After a decades-long declining trend in long-term interest rates, deflation is the number one enemy of the economy; a position held by inflation in the early eighties. However, we are in for a far-reaching turnaround in interest rate markets due to changes in economic structure, economic policy and global developments.