HERD - Systematic Equity Outlook: Victory Not Yet Secured
2024-02-17 22:19:00 ET
Summary
- Could policymakers fall behind the curve? Rapid disinflation has fueled consensus expectations for significant rate cuts this year. But pushback from the US Federal Reserve on the timing of the first rate cut raises the possibility that policymakers could be more cautious with easing this year than markets are expecting.
- More room for equities to price in disinflation: Our analysis suggests that the cross-sectional price action that took place during the abnormally high inflation period hasn’t reversed as inflation has normalized. This creates opportunities to generate alpha as disinflation becomes more fully priced.
- Navigating global opportunities and risks: Beyond the broadly constructive macroeconomic environment, we discuss how we’re navigating the Red Sea shipping crisis and assessing the evolving outlook for China.
By Raffaele Savi and Jeff Shen, PhD
As we look ahead, our systematic analysis continues to support the case for an eventual “soft landing” economic scenario, where inflation falls to central bank targets without causing a recession....
Systematic Equity Outlook: Victory Not Yet Secured