Global Equity Views 2Q 2018Contributor Paul Quinsee
Themes and implications from the Global Equities Investors Quarterly
- World stock markets have paused and volatility has returned, precipitated by concerns that trade tensions, and/or a monetary policy mistake, could bring this economic cycle to an end.
- We recognize the risks, yet see enough support from rising profits and sensible valuations to stay invested in stocks—and note that volatility is still moderate by long-term standards.
- Emerging market equities remain a favorite and Europe is more appealing after recent underperformance.
- Financial stocks worldwide offer plenty of opportunity and the high-flying technology sector, while clearly less attractive now, is not yet a threat to investors.
At first glance, the current environment remains rather favorable for equity investors. Profitability is strong and continues to rise around the world, interest rates are still very low in most countries and valuations don’t yet look excessive, for the most part. But after an exceptionally positive 2017 and a rip-roaring start to 2018, investors have become more nervous, fearing that a breakdown in international trade relations or a monetary policy mistake could bring this economic cycle to an end. Volatility has returned to markets, with investors more inclined to punish perceived disappointments rather than celebrate successes.
We recognize these concerns and believe that after a long cycle, which began in the depths of the global financial crisis almost a decade ago, we have probably seen the best returns from equity markets. But we don’t see any reason to expect an imminent end to the strong global profit growth that began two years ago—we think there are still opportunities for further gains. We recommend keeping equity investments at long-term average levels, at least, although aggressively positive allocations no longer seem sensible.
In the following pages of our Global Equity Views, we present our thoughts on the investment outlook, discuss market trends and spotlight both opportunities and risks. EXHIBITS 1 and 2 present snapshots of our outlook, as discussed and debated at our Investors Quarterly in April 2018.
Views from our Global Equity Investors Quarterly (April 2018), Part I
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