Valuations
The Nifty Fifty bull market of the early seventies was a mania in which investors got carried away chasing after a subset of prized growth stocks. While we do not think the Magnificent Seven stocks are in a bubble, they do have some parallels with the growth stars of 50 years ago.
After resisting the consensus narrative in 2022 that a US recession was imminent, and then predicting an immaculate disinflation for 2023, the Global Investment Strategy team has joined the dark side and is now expecting a recession to start in the US within the next six months. Accordingly, we recommend that investors underweight stocks and overweight government bonds.
The Draghi report highlights sensible reforms that would address many of Europe’s productivity shortcomings. Whether European capitals heed Mario Draghi’s advices remains to be seen.
The US suffers from enough imbalances to produce a mild recession. Unfortunately, such a recession could lead to a significant bear market in stocks, just as it did during the very mild 2001 recession.
Crucial leading indicators of the global and European economies continue to deteriorate. How should investors position their European portfolios to benefit from these trends?
MacroQuant continues to recommend underweighting equities and overweighting bonds. This is consistent with the Global Investment Strategy Team's decision to downgrade global equities to underweight in late June.
