Insights

All equity regions have experienced a large de-rating from their 2021 highs

September was the largest monthly decline this year and it produced a negative return of -3.3% for Q3

The good news - 2023 & 2024 US EPS estimates have started to inflect higher...

Through the prism of style indices, 2023 has seen a strong rotation towards Growth v Value

A significant driver behind the recovery in risk appetite over the last few months has been growing conviction over the delivery of a soft-landing for the US economy

Watch what markets do not what they say

Since 1978 we have identified six periods when inflation has more than doubled and moved significantly higher

A strong finish to Q2 delivers a 16.3% return YTD

Viewed through the prism of absolute PE’s the US (like most markets) has witnessed a rollercoaster in PE valuations since hitting a peak in April 2021

The strong headline FT Wilshire returns do not reflect market undercurrents

As we approach the middle of the year increasing attention is given to the EPS outlook beyond year end 2023

2023 has witnessed some key inflection points and reversals in market behavior compared with the 2022

An important second order effect resulting from the collapse of Silicon Valley Bank (SVB) ...

The +7.3% return in Q1 was delivered in three distinct phases

Share buybacks in the US have been a key feature of market dynamics during the post-GFC period...

The collapse of Silicon Valley Bank (SVB) and fears of contagion have hit global bank stocks, rippling through to wider risk off market sentiment

While the FT Wilshire 5000 adopted a risk off tone in February…

The improvement in risk appetite in recent months has been underpinned by a 'Goldilocks' scenario of easing financial conditions

The FT Wilshire 5000 has appreciated 14.5% from the mid-October low

Markets are convinced that inflation has already peaked and that interest rates should follow suit by Q2 this year.

The FT Wilshire 5000 delivered the 4th largest annual drawdown since 1970

The likelihood of the delivery of sustained disinflation in 2023

The second half of 2023 has seen the 2023 EPS growth rate forecast start to decline

Bear markets are not linear – they typically witness numerous rallies

The FT Wilshire 5000 rallies 8.2% in October

Scale of the drawdown in global equities in 2022 has produced a significant de-rating with US equites experiencing one of the largest PE contractions

The FT Wilshire 5000 has experienced a technical bear market in 2022 (defined as at least a -20% drawdown)

The rapid reversal in risk appetite in Q3 has produced a retest of the June lows

A key feature of 2022 has been the sustained strength of the US dollar

Hawkish Fed guidance sends FT Wilshire 5000 into reverse gear in August

Markets have been gripped by risk aversion since mid-August

After a period of relative stability, we are starting to see a deterioration in the EPS or profit cycle through the prism of estimate trail analysis

Equities are a long duration asset class and returns should be viewed via the prism of long-time horizons

Following a record-breaking decline in the first half of 2022, markets have staged a recovery led by the US.

US consumer durables, technology and retail have led the re-rating of the US market since mid-June

The first half of 2022 witnessed a significant correction to the FT Wilshire 5000 index taking the index back to levels last seen in early 2021

2022 has witnessed a large rotation in both factor and style indices

Stung by the persistency and level of inflation and the accusation of being behind the curve the Federal reserve has cranked up its hawkishness

Movements in US 30s/10s curve generally lead 10s/2s despite focus on 10s/2s

Consensus EPS growth forecasts have been resilient - is this reassuring or highlighting the risk that an EPS downgrading cycle is yet to commmence?

The scale of decline in valuations was one of the largest de-ratings witnessed in 30 years

The 9.6% return in July was driven by a rotation to growth stocks