Now 40,000 doesn't seem that far away US Stocks continue to be on a Ted do we get Out performance in the US this year or Do we get it elsewhere I like the old Stock market sayings and one of the Oldest ones is the bull markets narrow This bull market started 11 years ago And it's narrowing into the SP your Point you were saying earlier that it's Fairly typical for the S&P to forge Ahead European markets to lag they're Not doing badly but the SP is doing Better so we're expecting the US to Continue to lead the way this year but Europe looks cheap I think the relative Valuation story looks cheap yeah and if And if Europe has any chance it's got to Be it's got to be now with the kind of Valuations that we're seeing in the States yeah I mean that's one of the Great conundrums of this cycle buying Cheap stocks is not work buying cheap Markets is value started to work a Little bit more yeah there was a bit of Rotation in September October last year But I'm afraid growth against values now Making new highs yeah and at a global Stock market level the SP is the growth Trade you're up to the valley trade in Terms of what is ultimately driven us Over the last 12 months it's been Multiple expansion yeah do we get Central banks helping out with that this Year is there gonna be is the lower rate
Story gonna come back and help us at any Point in the next 12 months yeah I mean Think about it this time of year ago we Were expecting two rate hikes from the Fed we got three cuts so we were five Parameters out on that one we're not Expecting that kind of help this year But the taps are still on I just don't Think they're gonna be opened even more What happens when they get turned off Yeah well we saw a little bit of that in 2018 right the markets have got addicted To cheap money and one of the problems With that is that if you take that cheap Money away they can have tantrums Talking your Tantrums I people had back Shorting volatility at the moment yeah This it's pretty depressed and yet People see it going even lower what does That tell you about the markets kind of The about sentiment right now well we Think that that's one of the things that Has really been manipulated is that the Right word or affected heavily might be By central bank policy which is Volatility they are effectively taking Volatility out of the market that if we Were pricing things would definitely be There so while the central banks remain In place I think volatilities going to Stay fairly low Just just forever not forever you know They're not gonna stay with the taps as Wide open as they are right now forever
But I think that's one of the things They're doing they're suppressing Volatility we will see blips and Corrections and so on in the market but Central banks are buyers of all that's One of the reasons why volatility is so Low but dispersion is going to stay very Low this year by the sounds of things Judging by that vole story It doesn't sound again like a year for Active managers it's going to be Difficult most people are just buying an S&P tracker and doing very nicely out of That thank you very much I think that Will probably likely to continue this Year just in terms of you talked about Kind of mid-single digit returns this Year yeah I kind of what are the tails Look like in that forecast yeah I think If you're going to say give me ten Percent swing tail either side I'd be on The upside not the downside okay what Would get us to the upside then people Stop buying this market one of the Really extraordinary things about last Year is we made 24 25% on global Equities without much flows into equity As an asset class we did it despite fund Flows normally we do it because of fund Flows I think we could get that extra Spur to the market if people start Really buying this fear of missing out Retelling verses or is that institution But the institutional investors feel
More invested than retail does yeah it Kind of everyone I mean institutional Investors are often just agents for the Decisions of retail investors right sure Yeah so we've just not seen Participation in this bull market I Think that's one of the reasons why it Feels like one of the grumpiest most Gloomy most business abroad bull markets I've ever seen in my life Earnings earnings we're expecting four Or five percent global this year what Worries me a little bit if you want a Bit of a bearish story analysts are on 10% so that number needs to come down But as we saw last year the number came Down seven eight percent still the Market went up 25% where does the risk Line the earnings story is it the top Line is that the bottom line or is it The middle of the P&L because input Costs to a certain extent wages could be One of those yeah have the potential to Rise yeah we're seeing late cycle Increases in wage inflation I think that The risk to that forecast is generally In cyclical stocks where analysts are Forecasting a bit of a rebound this year So a lot of that 10% comes off us Expecting analysts expecting earnings Number Encyclicals to be up 1520 I think that's Where the risk is
