July Insight: US soft landing in the price

July Insight: US soft landing in the price

We open with a strategy piece by Alastair George, who believes that a benign US soft landing scenario is increasingly priced into financial market expectations. Inflation fears are starting to ebb as producer price indices remain subdued, yet growth prospects in the US at least are for now on an improving trend even as European survey data disappoints. However, our estimates of the equity risk premium and price/book multiples suggest a US soft landing is fully discounted. US equity valuations are once again abnormally high and with expected returns lower than average. Therefore the ‘Goldilocks’ scenario for the US economy, with unemployment remaining strong even as inflation falls, appears to be firmly embedded in the pricing of US equities. European markets are trading close to fair value, reflecting weaker growth prospects and the near absence of global technology leaders, missing the current investor enthusiasm for artificial intelligence. We maintain a neutral outlook on global equities and believe US long-term government bonds remain attractive. With factory gate inflation having slowed sharply, we now expect government bonds to outperform as growth decelerates towards the end of the year. However, global equity valuations slightly above their long-term averages offer little directional guidance at a time of cyclically low earnings growth.

We welcome any comments/suggestions our readers may have.

Download July Insight: US soft landing in the price here

Register now for free

Latest

insight

The Illuminator – February 2024

Financials | insight

Alpha Bank – Investor Day 2023

insight

January insight: Mixed start to 2024

Healthcare

Incannex Healthcare: Is life better on Nasdaq?

Incannex Healthcare is planning to move all its stock to Nasdaq. It is seeking access to a bigger capital market, greater visibility globally and more liquidity, ultimately leading to what it hopes will be higher returns for shareholders. This is what we know of its plans so far…

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free