The Global Stock-to-Bond Ratio: More Upside Ahead – July 8, 2024

A just-published report updated our multi-asset portfolio recommendations, which remain mildly pro-growth.

The underlying macro backdrop is broadly supportive for risk assets, but overheated tech stocks, tight credit spreads and policy uncertainty in the U.S. and euro area, imply choppiness in the near term. The earnings outlook remains positive for stocks, which historically has correlated with a rising stock/bond (S/B) total return ratio.

However, a lot of good earnings news is already discounted, particularly in the U.S. tech sector. Moreover, the MRB Cyclical Momentum Indicator for global stocks is at overbought levels, implying at least a consolidation in equity prices ahead. Nevertheless, broadening global growth should catalyze a relative earnings rebound in select non-U.S. markets and non-tech U.S. sectors.


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