Equity risk premia

The ERP is looking a fraction better post the recent drawdown (which is really just another way of saying the same thing).

The various measures of ERP are useful to consider (e.g. this one adjusted for COVID, this one adjusted for cash payments etc) but really it is the co-movement and average level we are after.

Add to this ERP mix a risk free rate of ~3% and you’ve got some decent ex-ante returns.

If markets do sell-off, heavily, over the next few weeks as the tightening cycle really gets underway, it will represent a good opportunity to reallocate from our presently moderately defensive positioning.

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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