Wealth Manager - the site for professional investment managers

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

MRB: fortune is still rewarding the brave on equity

MRB: fortune is still rewarding the brave on equity

Investors should continue to overweight equities in a multi-asset portfolio to take advantage of a recovering global economy and strong reflationary policy support.

Despite a flat first quarter, the underlying uptrend in the global stock/bond (S/B) total return ratio remains firmly intact. Our base-case scenario is that global equities will generate low double-digit total returns in the coming year, while a US 10-year Treasury suffers a moderate total return loss. By extension, the S/B ratio is poised to advance materially further on a 12-month horizon.


In recent months, investor confidence in the vitality and durability of the economic recovery has been tested by adverse winter weather in the U.S. and choppy and disappointing data out of China.

Still, it is worth noting global equities and the S/B ratio have proven resilient to disappointing economic data, with the S&P 500 at a record high and euro area stocks at a cyclical high.

With US economic surprises increasingly likely to turn positive given the current depressed level, even in the short term the global S/B ratio appears biased to the upside.

The charts below provide relative risk and valuation perspective on stocks versus bonds. The MRB Global Stock/Bond Risk Indicator captures cyclical, valuation and technical components of the ratio and is at a broadly neutral level and in an uptrend. Barring a deterioration in the global economic outlook, such a reading points to a further rise in the S/B ratio (that is, stocks outperform bonds) on a six to 12 month horizon.


The main downside risk to our constructive outlook is the risk of a debt scare in China. A Chinese policy misstep or escalating fears of domestic financial problems could sour global investor sentiment and undermine business confidence.

We place low odds on such an outcome, but in the absence of a robust export sector, policymakers in Beijing face a significant challenge in restructuring the economy, reducing credit market risks and maintaining healthy growth. Investors need to keep a close eye on China, but avoid overestimating the probability of an adverse outcome.

Peter Perkins is a partner at MRB - the Macro Research Board

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Citywire Scotland: how wealth managers use new tech

Citywire Scotland: how wealth managers use new tech

We caught up with a few wealth managers at our annual event in Gleneagles to find out what technological innovations they are employing across their businesses.

1 Comment Play CEO Tapes: Buxton to Gilbert - ‘my Glencore quandary’

CEO Tapes: Buxton to Gilbert - ‘my Glencore quandary’

Do not miss the first two minutes of this film as Richard Buxton shares how he has been challenged by a client for owning shares in a certain company.

Play CEO Tapes: the huge opportunities for asset managers

CEO Tapes: the huge opportunities for asset managers

From tech disruption, retirement and poaching, the CEO discuss the opportunities for their businesses in this episode.

Read More
Wealth Manager on Twitter