Asset Allocation

Asset Allocation Focus

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 Focus

Examining the threat to US equities from rising wage inflation

We expect rising wage inflation in the US to squeeze the profits of the non-financial corporate sector, which were a record high as a share of its output in Q2. This is one reason why we think the upside for the stock market there is limited, despite expecting it to continue to outperform Treasuries.

22 October 2021

Asset Allocation Focus

Three features of the new financial market regime

We think that the coronavirus crisis has altered several core features of financial markets, and expect these changes to endure even as the virus itself is suppressed across the largest economies. In our view, the key differences between this regime and the one that preceded it are mainly down to shifts in central bank policy brought about, or accelerated, by the events of the pandemic.

11 December 2020
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Asset Allocation Focus

The world after COVID-19

We forecast that the returns from equities will beat those from government bonds in the world after COVID-19. However, we expect the outperformance of large-cap equities in the US to end.

20 October 2020

Asset Allocation Focus

Lasting blow to supply capacity is not inevitable

It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to revert to the path of output they were on before the crisis. Nonetheless, with demand likely to be slow to recover fully, this could still take several years. And there will be several important exceptions to this generally optimistic picture.

Asset Allocation Focus

What a bout of deflation would mean for asset returns

This Focus examines the implications of deflation for asset returns. It is motivated by the recent collapse in market-based measures of US inflation compensation amid the spread of coronavirus, to their lowest levels since the Global Financial Crisis (GFC). That collapse almost certainly exaggerated the change in investors’ expectations for inflation. And, in any case, it has partly reversed in recent days in response to the announcement of further policy stimulus. Nonetheless, investors still seem to be braced for a short-lived fall in the annual rate of change in the US consumer price index (CPI).

25 March 2020

Asset Allocation Focus

What would ‘deglobalisation’ mean for asset allocation?

Globalisation has probably peaked and could be partly reversed as a result of technological change and protectionist policies. This would have significant implications for asset markets, which have generally benefitted from increased economic and financial integration over recent decades. In most scenarios, we think that asset returns would be lower over the next decade compared to the previous three.

24 October 2019

Asset Allocation Focus

What would 'deglobalisation' mean for asset allocation?

Globalisation has probably peaked and could be partly reversed as a result of technological change and protectionist policies. This would have significant implications for asset markets, which have generally benefitted from increased economic and financial integration over recent decades. In most scenarios, we think that asset returns would be lower over the next decade compared to the previous three.

24 October 2019
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