Geoffrey Dennis expects dollar to strengthen and 10-year yield to hit 5% level

Geoffrey Dennis, an independent commentator on emerging markets, anticipates the implementation of additional tariffs and foresees the dollar regaining strength despite its recent pullback, potentially surpassing parity with the euro.

Dennis, who expects US bond yields to rise, said on Wednesday that; “I also believe that although you have seen a bond market rally over the last week or two, the US bonds yields are going to go higher. Because ultimately we will see tax cuts from the US, which will absolutely not be covered by tariff revenues, and that is going to put yet more upward pressure on the US budget deficit, which in turn, is going to cause, if you like, the so called bond vigilantes to come back. And that is still a pretty good chance bond yields will hit the 5% level for the 10-year yield at this point now.”

He also expects emerging markets to underperform, if dollar continues to strengthen.

Dennis highlighted the transactional nature of Trump’s tariff policies, which are marked by reversals and delays, contributing to heightened uncertainty.

Recent tariff announcements targeting Colombia, Mexico, and Canada have either been cancelled or postponed, with China being the only country facing sustained tariffs and retaliatory measures. This unpredictability unsettles both investors and businesses.

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Dennis also points out that the possibility of tariffs on countries like Mexico and Canada cannot be ruled out, emphasising how rapidly changing events are creating confusion and nervousness in financial markets.

The US has been underperforming compared to other developed markets this year, accompanied by a weaker dollar, which could further influence investor sentiment.

Discussing India, Dennis views the country as a relatively strong performer in the potentially challenging global environment of 2025, characterised by a stronger dollar, rising bond yields, and limited or no rate cuts from the US Federal Reserve.

Despite concerns about growth, recent measures such as tax cuts in budget and the likelihood of an interest rate reduction are seen as positives.

Although valuations remain high, India’s market fundamentals continue to be attractive, supporting its potential for strong performance.

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