It\u2019s a real puzzle. US equities are back near all-time highs, implying that company sales and earnings should be strong over the next year or two. But yields on US treasuries are the lowest they\u2019ve been since mid-2016 and the Federal Reserve is talking about cutting interest rates, suggesting that growth will be weak for a while. <\/p>\n\n\n\n
So, should we expect the bull market in US stocks to continue? Or is a recession imminent?<\/p>\n\n\n\n
We think US equity investors were too fearful last December, but now they\u2019re firmly back in \u2018greed\u2019 mode \u2013 and overly optimistic about future returns. While global growth is trundling along at about 3.3% in 2019, company margins are coming under pressure and our financial models indicate that US equities are expensive by long-term standards.<\/p>\n\n\n\n
By contrast, bond investors are too pessimistic about the likelihood and severity of a global or US recession. We don\u2019t see anything scary enough on the horizon to justify allocating much to an asset like German 10-year bonds that offer only -0.3%. <\/p>\n\n\n\n
Likewise, the UK 10-year inflation-linked bond yields -2.5%. HM Treasury guarantees that if you lend it \u00a3100, it will pay back only \u00a378 in real terms after 10 years. We struggle to understand why anybody would \u2018cough up\u2019 for this. <\/p>\n\n\n\n
One of the biggest unknowns, though, is politics. The Trump tweet-torrent is having an ongoing impact on the global economy \u2013 trade between China and the US has slumped and companies everywhere are becoming more reluctant to invest abroad. Rising policy uncertainty worldwide is bad for long-term growth and is a challenge to investors. <\/p>\n\n\n\n
In summary, we have a small underweight to both equities and bonds. We also hold some cash and we are content to wait for exciting opportunities to arise.<\/p>\n\n\n\n
At Hamnett Wealth, we are always up-to-date with what’s happening so we can provide the best possible advice to our clients. If you would like our advice, please contact on us on 0114 235 3500 for a free, no-obligation review.<\/p>\n","protected":false},"excerpt":{"rendered":"
It\u2019s a real puzzle. US equities are back near all-time highs, implying that company sales and earnings should be strong over the next year or two. But yields on US treasuries are the lowest they\u2019ve been since mid-2016 and the Federal Reserve is talking about cutting interest rates, suggesting that growth will be weak for … Continue reading “Market Commentary for Quarter 2”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-35","post","type-post","status-publish","format-standard","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/www.hamnettwealth.com\/news\/wp-json\/wp\/v2\/posts\/35","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.hamnettwealth.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.hamnettwealth.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.hamnettwealth.com\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.hamnettwealth.com\/news\/wp-json\/wp\/v2\/comments?post=35"}],"version-history":[{"count":1,"href":"https:\/\/www.hamnettwealth.com\/news\/wp-json\/wp\/v2\/posts\/35\/revisions"}],"predecessor-version":[{"id":36,"href":"https:\/\/www.hamnettwealth.com\/news\/wp-json\/wp\/v2\/posts\/35\/revisions\/36"}],"wp:attachment":[{"href":"https:\/\/www.hamnettwealth.com\/news\/wp-json\/wp\/v2\/media?parent=35"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.hamnettwealth.com\/news\/wp-json\/wp\/v2\/categories?post=35"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.hamnettwealth.com\/news\/wp-json\/wp\/v2\/tags?post=35"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}