We expect global equity performance will be below its long-term median level, but we believe investors should hold equity allocations in line with policy targets. Within equities, we see opportunities in developed value, developed small caps, and China. We doubt European and emerging markets ex China equities will outperform, and we believe the share of active strategies that outperform will increase.
Asset performance is highly sensitive to the global business cycle. In this chart book, we highlight the significant shifts in performance distributions across the global business cycle for major asset classes, including equity regions, styles, sectors as well as for fixed income, real asset and currencies. Ultimately, understanding the distributions of asset performance across business cycle stages and considering where the global economy is headed are key inputs in a rigorous investment decision-making framework.
Yes, we expect US small-cap equities will outperform US large-cap equities this year. Our view is based on the belief that the large valuation spread that exists will likely narrow and that large company earnings are likely more at risk of missing expectations than small company earnings.
We expect global earnings growth will be below average next year, as prior interest rate hikes increasingly bite. With this backdrop, we expect value equities will outperform, Chinese equity underperformance will correct, and Healthcare may present an overweight opportunity.
We expect most investors should maintain equity allocations in line with policy targets. Consistent with this idea, we believe investors with portfolios that are more diversified across risk exposures will tend to fare better than investors holding more correlated investments.
Yes. We believe the attractiveness of UK government bonds has improved relative to just a month ago.
Thoughtfully, if at all. At this stage most investors should examine portfolio risks related to the war and monitor market developments.
Global equities have returned more to investors than high-quality global bonds in nearly three quarters of the last 30 years. The margin of outperformance during those years has been considerable, averaging 12.5 percentage points. That high historical success rate, along with our view that healthy economic activity will support both positive earnings growth and risk appetite, leads us to expect that equities will yet again outperform high-quality bonds.
This chartbook reviews the dynamics at play and includes global commentary on the recent inflation rate spike.
Today, the US Bureau of Labor Statistics released its monthly inflation report for April, which highlighted that prices paid by urban consumers for a basket of goods and services increased by 4.2% relative to the same month last year.