In focus

Schroders Equity Lens: your go-to lens on global equity markets


What’s been driving stock prices? Are they currently expensive or cheap? And which regions and sectors are poised to do well next?  

These are some of the questions we aim to answer in our quarterly publication – the Schroders Equity Lens, a compilation of key trends in global equities illustrated through thought-provoking charts. 

If you want to view the accompanying video, please click the video above or here.

Summary

Global equities ended the year on a high note, rallying by 6.8% in Q4, as a strong earnings season coupled with a relatively stable interest rate environment supported performance.

However, the spread of the Omicron variant, rising inflation and waning monetary stimulus weighed on valuations.

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The best performing region was the US (+10.1%). Europe (+5.8%) and UK (+5.6%) also performed reasonably well (all in local currency terms). In contrast, slowing Chinese credit growth hit EM (-0.4%) and Japanese (-3.9%) returns.

Our analysis suggests that the slowdown in China is yet to be fully reflected in developed market equity performance.

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In terms of sectors, performance was relatively mixed across cyclicals and defensives.

IT was the highest returning sector (+12.7%), but defensives also did reasonably well, including utilities (+10.4%) and real estate (+9.1%).

Communication services (-1.5%) and energy (+3.3%) were the lowest returning sectors.

Looking ahead, global equity earnings are expected to grow by only 7% in 2022 versus 53% in 2021. In addition, valuations could contract further as central banks hike interest rates.

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According to our composite valuation indicator, UK and Japanese equities are now trading close to their 10-year historical average.

Meanwhile, EM equities have derated significantly since their peak in January 2021 and are only slightly expensive. In contrast, the US and Europe continue to look the most expensive.

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Important information

This communication is marketing material. The views and opinions contained herein are those of the named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.

This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy.

The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.

Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.  Exchange rate changes may cause the value of any overseas investments to rise or fall.

Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors.

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