MacroResearchBoard

Equally-Weighted Stocks Struggle Versus Cash – March 4, 2024

A just-published report highlighted the surging global stock-to-bond total return ratio, which has reflected a combination of improving global growth momentum, rising 12-month forward earnings expectations and higher bond yields. The ratio is approaching overbought conditions, but the strength of the global stock-to-bond ratio in large measure reflects the narrow and huge outperformance of a limited number of large-cap stocks over the past year, primarily in the U.S.

A very different view emerges from a comparison of the global equity total return in U.S. dollars versus that of a U.S. 3-month Treasury bill, and the same measure using the global equity equal-weighted total return. It is notable that the latter is still in the trading range that has prevailed since early-2023 and is only marginally above the immediate pre-pandemic level, i.e. cash has provided a better volatility-adjusted return than the average global stock over the past four years.