We don’t believe so—even though fiscal stimulus, corporate tax cuts, international trade tensions, and US dollar strength all seem to be advantageous for US small caps relative to US large caps.
Japan’s long-term economic outlook looks brighter, and the positive structural and governance changes achieved under prime minister Shinzo Abe have improved the opportunity set for long-term institutional equity investors. This progress—paired with improving corporate fundamentals and reasonable valuations—boosts the appeal of Japanese equities. But, several ongoing internal and external risks to the reform agenda and economic outlook require monitoring.
No. The US public equity market remains the largest and most liquid in the world and continues to offer a robust opportunity set for investors.
In our 2018 outlook, we review the prospects for several asset classes—developed and emerging markets equities, credit, real assets, sovereign bonds, and currencies—and share the advice of our chief investment strategist.
Slowing buyback activity is a sure sign it’s getting late in the current market cycle, but we expect buybacks to continue fueling the market for now.
Not in our opinion. Recent market leadership by the so-called FAAMG stocks is not extraordinary relative to history, and their valuations and fundamentals, combined with this year’s relatively healthy market breadth, mean that they don’t necessarily present an outsized threat at this time.
Change is in the air and the prospect for a bit of sunshine to break through the overhang of slow growth and lower-for-longer yields is palpable. Of course, the sun doesn’t shine forever, and overall our views are little changed. The things we have been worried about for some time—high valuations for certain risk assets, record-low interest rates, slow economic growth—have not gone away. The surest call to make for 2017 is that higher growth expectations will be paired with the distinct possibility of negative outcomes, putting a premium on diversification and liquidity management.
Risks to US equities remain firmly skewed to the downside, but as long as the Fed remains on hold and the twin earnings headwinds of weak oil/strong dollar continue to fade, US equities could continue to muddle along near recent levels.
Sentiment toward the global banking sector was extremely poor to start the year, owing to a variety of factors, but reversed sharply in recent weeks as the latest news and data seemed to alleviate investors’ worst fears.
Ongoing growth headwinds, an earnings recession, and still-elevated valuations make us skeptics that US equities’ four-year bull market can continue much longer.