Market Commentary

October 9, 2024

For most of 2024, equity investors have generally expected monetary easing and a soft landing. As a result, stock valuations have already discounted much of this increasingly likely outcome.  We suspect very limited, if any, multiple expansion in the near- to intermediate-term, requiring earnings growth to drive prospective equity returns.  Importantly, earnings growth is showing nascent signs of acceleration (partly due to easy comparisons) just as monetary loosening and significant Chinese stimulus are set to add further support, especially in 2025.

We suspect stock gains will continue to broaden as investors anticipate cyclical improvements in the global economy, favoring a broad group of industries, including technology, industrials, financials, transports, and beleaguered consumer cyclicals.  However, given our expectation for a relatively muted economic rebound in 2025, our efforts are focused on identifying firms that can demonstrate operating leverage to drive outsized earnings gains even if revenues accelerate only modestly.  Moreover, we believe dividend-paying stocks will return to favor as bond yields become less competitive – our focus remains on investing in high-quality companies that can grow dividends at an above-market pace through earnings growth and higher payout ratios.

For our latest full Global Investment Outlook & Strategy Update, download the .pdf document.