MacroResearchBoard

Global Equities: Economic Growth Needs To Boom – February 8, 2021

A just-published report updated our multi-asset investment strategy and recommendations. Global equity markets have surged since the fourth quarter of last year, pushing valuations to expensive levels, and are now overbought and thus vulnerable to a correction or at least a consolidation phase. The sharp increase in earnings expectations reflects high hopes for a significant improvement in the global economy, successful vaccine distributions, and open-ended policy support. This, in turn, puts the onus on global growth, and particularly trade, to deliver or else a disappointment phase looms.

While we are modestly positive on the outlook, rich valuations and already-optimistic earnings expectations warrant a neutral stance on equities for now. We expect to reduce our mild overweight position in the U.S. and add pro-growth non-U.S. exposure on signs of a more broad-based economic recovery. Emerging markets are our preferred pro-growth play within global equities, and we remain overweight within a global equity portfolio.