Asset Allocation

Asset Allocation Update

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

Asset Allocation Update

We expect LatAm equities to trail those in EM EMEA

We think that MSCI’s Emerging Markets (EM) Latin America Index will continue to underperform its EM EMEA Index over the next couple of years, albeit not to the same extent as it has in 2021 so far.

12 November 2021
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Asset Allocation Update

Reading the runes of relative valuation within the US stock market

One reason to think that the performance of the US stock market will underwhelm, at least in the long run, is that some of the gaps between the valuations of its most highly and lowly valued companies have become even larger than they were on the eve of the Great Crash and the bursting of the dot com bubble.

4 November 2021

Asset Allocation Update

Two big challenges to current market pricing

Two assumptions still appear to underpin pricing across financial markets – that economic growth will remain exceptionally strong, and that inflation will settle close to central banks’ targets again before very long. In the US in particular, we think that both assumptions will be challenged over the next two years, with several significant implications for asset allocation.

25 October 2021

Asset Allocation Update

Energy, inflation and asset allocation

We doubt that the recent surge in energy prices will be sustained, but still think that investors are underestimating the likely strength of broader price pressures in the US over the next few years. This Update explains our view, puts it in historical context, and considers the implications for asset allocation.

Asset Allocation Update

Correlation between US equities & Treasuries not set in stone

While many observers seem to have been surprised by last month’s joint sell-off in US equities and Treasuries, there is no reason in principle why the two assets should be negatively correlated. It all depends on the economic and policy backdrop. Our view is that future returns from both will disappoint.

Asset Allocation Update

Infrastructure & reconciliation unlikely to mean Q1 rerun

While the large fiscal stimulus passed in the US in the first quarter of this year appears to have been a key reason why equities there outperformed Treasuries at the time, we think that the infrastructure and reconciliation bills currently making their way through Congress point in the opposite direction.

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