Developments in China shake up the outlook

Three key developments in China over the past month or so are worth highlighting, as they feed into our broader asset allocation forecasts for the next couple of years. First, what started as a regulatory crackdown on a handful of sectors seems to have morphed into a broader ideological campaign, with major implications for a wide range of Chinese companies. Second, distressed property developer Evergrande has slid further towards default, heightening concerns about the country’s construction sector in particular, and its financial system more generally. Third, China’s economy generally has shown further signs of slowing.
John Higgins Chief Markets Economist
Continue reading

More from Asset Allocation

Asset Allocation Focus

The case for US banks’ equities to outperform

We forecast that banks’ equities will outperform the rest of the US stock market over the next couple of years, for three main reasons.

24 November 2021

Asset Allocation Update

Taking stock of potential corporate tax reforms

This Update answers several questions on the Biden administration’s latest proposals for US corporate taxes as well as the global tax deal recently agreed among the world’s major economies. The proposed changes are probably, at the margin, a reason to think that US equities will underperform. Within the US market, we suspect the earnings of technology and pharmaceuticals companies would see the largest hit.

19 November 2021

Asset Allocation Update

Why we still aren’t convinced the S&P 500 is in a bubble

Even though the S&P 500 has risen by almost another 25% or so this year, we are still not persuaded that the US stock market is in a bubble that is about to burst.

12 November 2021

More from John Higgins

Capital Daily

What to make of inflation and bond yields in the UK and US

The renewed rise in consumer price inflation in the UK reported today contrasts with the dip in the US announced yesterday. Admittedly, the former has risen from a low level, while the latter has eased back from a high one. But these outcomes have coincided with a recent relative shift in inflation compensation in the two economies, which has fed through to some underperformance of Gilts vis-à-vis Treasuries. We don’t expect inflation in the UK and the US to head in opposite directions indefinitely, though, and foresee a smaller rise in the 10-year yield in the former than the latter between now and the end of 2022.

15 September 2021

Long Run Update

What the S&P 500’s valuation may mean for future returns

Although the US stock market’s valuation is nearly as high now as it was at the height of dot com mania, we don’t expect the return from it to be as bad in the next decade as it was in the 2000s.

31 August 2021

Capital Daily

What to make of the S&P 500’s soaring valuation

The S&P 500 remains within a whisker of its all-time high, despite faltering a bit today. Although much of its gain since spring 2020 has reflected growth in earnings, its valuation has also risen sharply and in cyclically adjusted terms is nearly as high now as it was at the height of dot com mania. While that might ring alarm bells, we don’t expect the return from it to be as bad in the next decade as it was in the 2000s.

26 August 2021
↑ Back to top