Too early to call time on the equity rally
By
👤UBS
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US and global stocks had another volatile week, after the biggest weekly sell-off since March, but still ended in positive territory. That was largely thanks to a positive start to the US earnings season. While only about 20% of US firms have reported so far, 90% have beaten earnings expectations, and we expect earnings per share (EPS) growth of 23–24%. Strong earnings growth is keeping equities attractive relative to bonds, despite the 80 basis point rise in 10-year US Treasury yields this year. Indeed the equity risk premium, a measure of the appeal of bonds versus stocks, has been shifting in favor of equities and now stands at 3.8% versus a median of 3.2% since the 1960s. In addition, we think 10-year yields are unlikely to rise much further, with the latest FOMC minutes reinforcing our view that rate hikes will remain gradual.
By
👤UBS
