What are you suggesting to clients that They do right now Well i think that you know in the Context of some of the things that Market participants have had to absorb In the last couple of months risk assets Have held up reasonably well yes there's Been massive pain particularly in Unprofitable tech and very long duration Assets and equities have pulled back but When you consider how much inflation and Interest rate rises Investors have had to absorb the war in Europe and growing risks of recession They've held out reasonably well But market sentiment has become very Negative and i think unless we get a Deep recession there's a limit to how Much equities will fall from here Particularly given still very negative Real rates peter when you sum Goldman sachs economics into your Legendary equity universe all the Different people that you're linking With in the sell side your research Analysts and such What inflation number do we get back to German inflation is unspeakable American inflation is a different Unspeakable But what level do we get back to out There well i think our viewers and Indeed i think the central bank's view And the market's view is that at least
Some of this inflation is temporary and Will start to ease particularly in Relation to commodity prices and some of The supply Side Constraints that we've been seeing uh Core inflation of course has gone up but Less so in europe than the us and There's less tightness in the labor Markets but certainly i think inflation Is stabilizing in this cycle at a higher Level than it did in the post-financial Crisis era and there's still a question I think about what the appropriate level Of interest rates will be As we settle down At a lower level of inflation that we're Seeing now but a higher level than we've Been seeing for many years bearing in Mind that real interest rates and Nominal rates are still very low In the context of where inflation is Likely to to be and i think that that's Attention is still a key focus for Investors peter does all this add up to Being a screaming bull basically are you Saying to tom get out of triple leverage All cash and go all in uh on apple on Amazon i mean is that basically what This translates into I i wouldn't say uh we would be really Bullish we are bullish Of equities on a relative basis we've Got reasonable upside into the modest
Double digits over the next 12 months in Most equity markets because we think Some of the tensions that investors are Clearly focusing on and some of the Uncertainty about where rates will peak And how weak economies will be will Start to fade over that period but i do Think it's important to also put things In context we've had years of strongly Rising performance in financial assets In equities largely as interest rates Have just trended downwards and that's Not going to continue in this next cycle So we would be looking at positive but Lower index returns and much more focus On alpha much more differentiation Beneath the index levels of equity Markets within and across sectors
