Citi leger med historien i en gennemgang af markedsudviklingen. Aktierne er steget med 25 pct. på årsbasis siden pandemiens start – dobbelt så meget som i det foregående årti, 11 pct. på årsbasis. Men vil den udvikling fortsætte? Aktieprisen er kommet op på 23 gange indtjeningen. Det begynder at vække bekymring. I den forbindelse skeler Citi til Kina, hvor aktierne er faldet med 30 pct. siden marts, fordi myndighederne har grebet ind med skrappe reguleringer over for især tech-giganterne, og nu er aktieprisen på 14 gange indtjeningen. Vil det skabe grundlag for store kursstigninger i de kommende årtier – i modsætning til USA? Citi drister sig til en sammenligning med Det store spring Fremad under formand Mao. Det endte i en katastrofe. Men efter Maos fald kom fire årtier med liberaliseringer og vækst. Citi kaster tanken om the “Great Leap Forward” i vejret, men afholder sig dog fra at vurdere, om det amerikanske aktiemarked står i en tilsvarende situation.
Uddrag fra Citi:
A “Great Leap Forward” (For US Markets)
Since COVID-19 struck, US equities have risen at a 25% annualized pace compared to the 11% pace during the prior decade of economic growth and recovery. A concentrated macro shock deeply depressed one sector of the economy. Widespread macro stimulus has generated a boom elsewhere while reducing fixed income yields of every duration.
Fed Chairman Powell explained the Fed’s priority is “maximum employment.” Even if the Fed’s easing pace slows, this points to accommodative monetary policy deep into the recovery. Powell dismissed near-term inflation as a bi-product of COVID-19 distortions. In theory, current US employment would be five million higher had the COVID-19 shock not occurred.
By end 2022, Citi analysts expect a moderation in both stimulus and economic growth. As such, forward looking markets may generate moderating equity returns ahead. However, with central bank “financial repression,” Citi analysts continue to see cash and most fixed income as uncompetitive as an alternative.
Past performance is no guarantee of future results. Real results will vary.
Citi analysts continue to shift equity portfolios toward potential drivers of sustained returns rather than mere recovery from the COVID-19 shock. Valuation and relative return estimates leave Citi analysts overweight global equities while underweight global fixed income and cash.
While Citi analysts agree with Powell that COVID-19 distortions to the economy are not long-term inflation drivers, the Fed’s policy itself should generate somewhat higher trend inflation in the decade ahead. Other DM central banks are on a roughly similar course.
In the decade past, the inflation-adjusted cash return was -12%. In the decade ahead, Citi analysts expect a 15%-20% real wealth loss in cash and a -10%-15% real wealth loss on investment grade USD fixed income assets. While coming down, global equity cumulative real returns for the decade ahead may be in a 30%-40% range.
While global investors enjoy the rally in US equities, they fret over their valuation (23X this year’s estimated EPS). In contrast, China’s equity market dropped by more than 30% since February and trades at 14X this year’s estimated EPS. China’s new regulations of firms with concentrated economic power has caused certain market leaders to plummet. A history of similar swoons and specific actions set the stage for multi-year market recoveries.
