Key Highlights from this interesting read:
Clients were right to sell stocks in 2022. 50% of their clients have lower allocation to equities than they did a year ago.
Technology and communication services have since ranked as the 2 best performing sectors in S&P 500 this year.
Over the last 10 years the US Stock market has outperformed Europe by 90-125% and china by 175%.
2/3rd of their US Clients do not have exposure to China at all. "Home Bias"
Multiple reasons why European equities might be bullish include a wider than usual valuation discount as compared to the US. Outperforming the US market, PMI at highest levels since last year, lower energy prices.
1 out of every 5 Russell 3000 Stocks have fallen more than 75% from their 2021 highs.
Over $150Bn increase in clients allocation to Cash over the last 12 months.
$7bn is the amount of capital their clients have allocated to real assets and private credit.
Remote working is 7x times more common than before the pandemic, reducing demand for commercial real estate and valuations have already declined on the basis of high interest rates.
US Regional banks have 4.5times more exposure to commercial real estate as compared to the larger banks. If real estate loans needs to be marked back down to the market values then this could have an impact on the lending levels which could lead to an increase in the risk of recession.
Higher interest rates -> Higher cost of capital -> lower asset valuation -> higher hurdle rate for profitable investment
With crisis comes opportunities.
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