The bigger pictureCash remains a competing asset - the US policy (cash) rate remains the dominant issue for global investors, both its current level and future trajectory. The return on US cash is often viewed as a ‘risk-free’ benchmark that other investments must surpass to justify the additional risk. Real yields look appealing - real (inflation-adjusted) yields on fixed income are currently attractive when compared to most of the past twenty years, and they appear reasonable within the broader context of the past thirty years. Furthermore, corporate bond spreads in developed markets have widened since the start of the year. Elevated valuations of some equities - from a long-term perspective, compensation for risk remains low in the equity markets of the US, India, Taiwan and Australia. Other global equity markets appear relatively attractive, though less so than they have done in recent years. Indeed, the most notable moves since the end of 2024 have been a reduction in the compensation for risk in equity markets in Europe, South America and China. |