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(20 Impressive way to read the markets) 👇
✔ “This is a time when investors are looking for a way forward. While headlines about US debt, the impact of artificial intelligence, US-China tensions and the war in Ukraine dominate the news, we believe the landscape for investing has the potential to evolve positively.”
✔ “Our view, reflected in our updated Strategic Return Estimates, is that investors who stay invested and rotate their portfolios toward timely opportunities may be well-rewarded over the next decade.”
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📢 4 VALUABLE TIPS ON MARKETS
👉 “Stay invested and be mindful of what and when to invest”
👉 “A different strategy is to extend duration by buying intermediate duration corporate bonds, US municipal bonds and preferred equity securities. By doing so, investors can potentially retain higher yields for longer and may profit if and when interest rates fall, as they will likely do when the Federal Reserve reverses course and starts cutting rates.”
👉 “Non-US equities present good value. Non-US shares are trading at historically wide valuation discounts to US shares. At the same time, the prospects for growth outside the US suggest that non-US earnings may grow substantially.”
👉 “After the double market shocks of the pandemic and an overly reactive Fed, the next decade looks like one where returns may be above average. Those who stay in cash will not see returns when markets are recovering.”
📢 LESS INFLATION ON THE HORIZON
✔ “We believe headline US Consumer Price Index (CPI) inflation is set to slow to 3.5% by the end of 2023, down from 6.5% at the end of 2022. A further decline is likely to get close to the Fed’s 2% target in 2024. Getting there will require some economic pain.”
📢 HOW CAN SUITABLE INVESTORS RAISE EQUITY ALLOCATIONS?
✔ Selection of equity markets and sectors that have lower than typical valuations
✔ Investments that may provide suitable investors with an entry point at the minimum price of a market over a pre-set period
✔ Strategies that seek downside risk mitigation at the price of giving up potential returns
✔ Markets that may benefit from foreign exchange movements into returns
📢 AS US DOLLAR DOMINANCE ENDS, CURRENCIES MAY DRIVE RETURNS
✔ The Federal Reserve’s aggressive tightening cycle and global shocks contributed to the strength of the US dollar in 2022, which reached its second highest value in history.
✔ In the coming two years, we expect the Fed to unwind half of its tightening steps while other central banks stay relatively steady.
✔ US dollar appreciation supported inflows into US stocks which are now trading at a historically high valuation premium to international equities.
✔ Non-US equity returns are poised to gain from currencies when they appreciate against the US dollar.
📢 WILL THE NEXT CYCLE BE DIFFERENT FOR NON-US STOCKS?
👉 Of the $4 trillion in global market cap created so far this year, 89% can be attributed to just 10 companies.
✔ “A common misconception among US-biased investors is that US stocks always have and always will trade at a premium to shares abroad.”
✔ “While this has certainly been true for the last decade or so, it is not a law of nature. In fact, for much of the last 100 years US equities have traded much closer to parity and sometimes even at a discount to their global peers.”
✔ “Over the past 15 years, however, US equities have gradually richened relative to international shares as America’s tech dominance offered investors a highly coveted segment of growth in an otherwise muted global growth environment.”
✔ “While global equities are unlikely to simply surge higher in the year ahead, we see both cyclical and structural tailwinds for non-US shares in the expansion that will eventually follow the present period of economic uncertainty.”
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Disclosure
This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. This material has been prepared for informational purposes only. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.