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Schroders Equity Lens October 2024: your go-to guide to global equity markets
The narrative that the Magnificent-7 are the sole drivers of stock market returns has passed its use-by date. Many more companies and sectors are delivering returns.
Lees volledig rapportSchroders Equity Lens - October 2024
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The October edition of the Schroders Equity Lens is now available:
Summary:
- The narrative that the Magnificent-7 are the sole drivers of stock market returns has passed its use-by date:
- a significant proportion of stocks have performed better, both within the US and internationally (slides 6-7).
- US utilities is the top performing sector in 2024, EM Asian sectors are up there too. It’s not all about tech (slide 8).
- This shouldn’t be a surprise: top performers in one year are rarely among the top in the next. They’re usually among the worst (slides 9-10).
- But, if you track the global market, you get a lot of exposure to six past US winners and less to the wider opportunities (slide 11).
- It’s not just a handful of US companies which are forecast to deliver high earnings growth. The earnings outlook has broadened: almost half of US, Europe ex-UK and Japanese companies are now forecast to deliver double-digit earnings growth in the next 12 months. The UK isn’t far behind (slide 12).
- And cheaper stocks lie away from the biggest ones (and away from the US) (slides 13, 32-36).
- Deviating from the market has been a winning strategy when concentration has been high (slide 14).
These additional summary points from last quarter remain valid and worth keeping in mind:
- US inflation has fallen below 3%, the historical sweet spot for equities. The odds of beating inflation and average returns in excess of inflation have been highest when inflation has been in this 1-3% range (slide 15-16).
- Small caps have particularly enjoyed this environment in the past. Lower quartile, median, mean, and upper quartile returns have all been highest when inflation has been 1-3%. This range of outcomes has been wide, however, and much wider than large caps (slides 16-18). Small caps are riskier.
- US and non-US small caps are also trading at record levels of cheapness vs large caps (slide 27).
- The start of a Federal Reserve (Fed) cutting cycle is normally good for US equities and bonds. Equities have outperformed bonds which have beaten cash when the Fed has started cutting rates, on average (slide 19).
- The quality style tends to do well in all cutting environments, growth does best if a recession is avoided, defensives if one isn’t (slide 20).
Chart of the month:
Lees volledig rapportSchroders Equity Lens - October 2024
57 Pagina's
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