by Lee Jackson
1) We are in the first phase of a new investment cycle, following a deep recession. The ‘Hope’ phase – the first part of a new cycle.
2) The economic recovery looks more durable as vaccines become more likely.
3) Our economists have recently made upward revisions to their economic forecasts and it is likely that analysts’ expectations will follow.
4) Our Bear Market Indicator (which was at very elevated levels in 2019) is pointing to relatively low risks of a bear market despite very high valuations.
5) Policy support remains very supportive for risk assets. There is both a central bank ‘put’ – a belief that central banks will be there to provide as much liquidity as is required – and a fiscal ‘put’ as governments have scaled up their willingness to support growth.
6) The Equity Risk Premium has room to fall.
7) The resumption of zero nominal interest rate policy in the recent past, together with the extended forward guidance, has created an environment of greater negative real interest rates.
8) Equities offer a reasonable hedge to higher inflation expectations.
9) Equities look cheap relative to corporate debt, particularly for strong balance sheet companies (60% of US companies and 80% of European companies have dividend yields above the average corporate bond yield).
10) The digital revolution continues to gather pace.
Source: 24/7 Wall Street
https://247wallst.com/investing/2020/09 ... SEP082020a