Tempering our optimism

We no longer expect equities and corporate bonds to outperform “safe” government bonds by anything like as much as we did a couple of quarters ago, and we continue to forecast that some other “risky” assets, including most commodities, will struggle over the next couple of years.
John Higgins Chief Markets Economist
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Asset Allocation Chart Book

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.

16 September 2021

Asset Allocation Update

Putting risky asset valuations into context

This Update compares the valuations of the twelve different “risky” asset classes that we cover on our Asset Allocation service, both relative to one another and to the yields of “safe” assets, as well as explaining how those valuations inform our long-term returns forecasts.

13 September 2021

Asset Allocation Update

Three key points about China & asset allocation

China’s economy has lost momentum recently, and we expect it to more or less tread water over the remainder of this year, even as other major economies continue to recover. Meanwhile, the government’s regulatory crackdown on parts of the private sector seems to be broadening in scope and increasing in severity. We think that these developments have three main implications for asset allocation.

7 September 2021

More from John Higgins

Asset Allocation Update

More thoughts on the effects of inflation on asset returns

The muted reaction in the markets so far to today’s above-consensus surge in US inflation presumably reflects a view that it won’t have as much of a bearing on economic growth or monetary policy as periods of high inflation have sometimes had in the past.

13 July 2021

Asset Allocation Update

What’s behind renewed US equity outperformance?

It has become harder to make the case that the stock market in the US will fare worse than those in the rest of the developed world, now that the “rotation” trade has fizzled out. Nonetheless, we still think there are other reasons to expect the relentless outperformance of US equities to end.

7 July 2021

Asset Allocation Update

Would US equities beat Treasuries if inflation surged?

The received wisdom is that inflation is worse for government bonds than for equities. Yet the S&P 500 has fared worse than 10-year Treasuries in a couple of periods of high inflation in the US since the 1960s.

1 July 2021
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