Neutralise tactical bet in risk assets as further multiple expansion is limited

In late January, Evidente recommended a tactical overweight bet in global equities and risk assets more generally based on the prospect that the world’s major central banks would deliver more monetary stimulus. Since then, the MSCI World index has increased by over 7%, led by a plus 8% lift in the S&P500. Now that that the ECB and BOJ have announced expansions to their QE programs and the Federal Reserve effectively delivered more stimulus overnight by pushing out the timing of policy 'normalisation', the scope for further multiple expansion of US and global equities in the near term is limited. Following the rally, the S&P500 is now trading above 16x consensus 12 month forward EPS, which is expensive. Upgrades to growth prospects are therefore necessary to drive the market higher but the evidence in the US isn't encouraging; consensus EPS forecasts for the S&P500 have stagnated in the past two years. Against this backdrop, Evidente recommends that investors neutralise their tactical bet in global equities and risk assets more broadly. (VIEW LINK)