One of the great things about memes is how effortlessly effective they are at conveying a tonne of information, quickly.

The below wraps up much of our feelings about the market.


The justifications come from the reasonable level of the equity risk premia, shown below…

…and elevated profit shares…

…with a double tailwind to corporate profits from a generally strong economy, to which that enormous margin is applied.

That’s the good stuff, that can help justify the robust market performance and level.

In this post, we won’t go into all the metrics that would argue for lower forward looking returns, but to pick one such example, and run with it, we see a forward looking market return that is vastly more modest than it used to be (<3% CAGR in the below frame, where the vertical line intersects the pink line).

Mind you, that’s still a lot rosier than the GMO forecasts. We say that somewhat tongue-in-cheek, because their forecasts have looked like this for many years now.

We also think that the DAA outlook for shares is somewhat weak, with cyclical upside pressure to rates likely to weigh on key parts of the market (tech, health, REITs, growth stocks more generally), which combines unfavourably with those high starting valuations (meaning the market is expensive) but we’ll leave that to another time, and just enjoy the meme for now.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.

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