Global Equities Favoured

Global growth is expected to remain mostly supportive buoyed by robust demand and continues to be the main driver in asset prices for the next few years. Over this period, the risk adjusted returns for the equity class across the major regions remain significantly above that of the fixed income, particularly given the ongoing rate normalization in US followed by ECB. We expect the disparities in risk adjusted returns between equity and fixed income to vary across region in the medium to long term horizon. In the US, equity valuation reflect slowing earnings growth with bond prices stabilizing beyond first few years. EU equity market seems well poised to deliver a robust growth through the medium horizon while the belated start to the rate tightening process will result in subdued returns in the corresponding bond market. Both within EM equities and sovereign bonds, the country/region specific factors remain to be the main driver in addition to the sensitivity to the interest rate environment in the US.