This report on asset allocation in the current environment is the fifth in what has evolved into a series of occasional papers on the evolution of the secular bear market in equities and our thoughts on how investors can best cope with the prevailing uncertainties. While recognizing that conditions could certainly remain benign for some…
Valuations remain compressed, making identification of relatively attractive opportunities hard to find.
Consensus earnings expectations seem too high considering the strong market headwinds and advanced nature of the earnings cycle, while valuations remain elevated.
While there is some cause for cautious optimism on earnings, earnings growth is cyclically stretched and more likely to decrease than continue to rise. Consensus expectations for profit margins and earnings expectations set a high bogey.
Normalized P/E ratios that adjust for earnings cyclicality suggest that these markets are quite a bit more expensive than do standard P/E metrics.
U.K. charities that must operate under income-only spending policies should actively monitor and manage the potential biases a high dividend yield strategy may introduce.
Valuations remain reasonable and upside potential outweighs downside risks.
Investors’ allocations to energy-related assets have increased significantly. Given that energy commodities are overvalued, should we be concerned?
U.K. equity valuation metrics provide mixed signals, but suggest that the market is close to fair value unless one assumes a rather dramatic decline in earnings just over the horizon.
With valuations more concentrated, style and market cap should be weaker drivers of return.