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Do Renewed COVID-19 Lockdowns in China Change the Outlook for Chinese Equities?

No. Despite the recent spate of lockdowns in China, we still anticipate some form of easing of the current zero-COVID policy and increased support for the economy following the Party Congress in October. This will ultimately drive a rebound in the Chinese economy and allow Chinese equities to outperform global equities. While the timing and […]

September 2022

Small-Cap Stocks Present Large Opportunity

US small-cap stocks have underperformed large-cap peers in recent years, opening a significant valuation discount that seems hard to justify based on relative earnings strength or balance sheet health. Looking ahead, the sector exposure of small-cap stocks may make them better positioned for the current environment of rising interest rates and high commodity prices. While […]

June 2022

Are Global Corporate Earnings Expectations Too Lofty?

Yes, we think corporate earnings expectations are likely too high. This is because earnings are well above the long-term trend, and we expect inflation and higher policy rates will put downward pressure on profits margins. After growing by more than 50% in 2021, global corporate earnings are significantly higher than the long-term trend. However, nominal […]

June 2022

Is the Decline in Chinese Equities Justified by Market Fundamentals?

We don’t think so, as the markets are pricing in more severe conditions than we believe are warranted. The MSCI China Index, which tracks Chinese stocks listed in both Hong Kong and the United States, has sold off sharply thus far in March and is down roughly 25% year-to-date, and over 50% from its February […]

March 2022

Global Equity Performance Exceeds That of High-Quality Bonds

Global equities have returned more to investors than high-quality global bonds in nearly three quarters of the last 30 years. The margin of outperformance during those years has been considerable, averaging 12.5 percentage points. That high historical success rate, along with our view that healthy economic activity will support both positive earnings growth and risk appetite, leads us to expect that equities will yet again outperform high-quality bonds.

December 2021

China A-Shares Outperform Global Equities

China’s equity markets have lagged global equities sharply thus far in 2021 in the face of a regulatory crackdown. We expect Chinese equities, particularly China onshore A-shares, to outperform global equities in 2022.

December 2021

Don’t Expect EM ex China Performance to Impress

Emerging markets ex China equities have underperformed their DM peers this year due, in part, to greater economic and political challenges, which have weighed on sentiment toward the bloc. We expect these issues to persist into next year and are skeptical that EM ex China equities can outperform DM equivalents.

December 2021

Active Equity Manager Performance Benefits as Breadth Widens

A market environment with a wider breadth of winners and losers provides greater opportunity for skilled active managers to distinguish themselves. Given the more balanced earnings contribution across sectors relative to 2020–21 and the widely dispersed equity valuations, we expect the breadth of winners and losers will be wider in 2022.

December 2021