Looking ahead to 2005, our forecasts are that bond yields will rise modestly, taking the US 10-year Treasury to around 4.3% compared to some 4.1% at the time of writing and stay there till mid-year. Thereafter there is potential for yields weakening to sub-4% levels as growth in the US moderates.
For equities we see a significant risk of a marked fall of around 10% compared to the levels at the time of writing, around 1200 on the SP 500, 2750 on the DJ Stoxx 50.
In this environment, our initial recommendation is for investors to hold short dated or emerging market bonds and to...
