Most asset classes will provide investors with negative real returns going forward, according to US asset manager GMO. There’s just one exception to this rule.
Beware of highly-leveraged US stocks
Highly-leveraged US companies face a disproportionate rise in interest payments as the Fed has started hiking. But investors aren’t being compensated for this at all.
Don’t buy America!
Investors who are buying into the Trump rally now are likely to be disappointed. Long-term return prospects for the asset class are severely impaired.
Falling discount rates – gain before the pain
The ultra-loose monetary policy pursued by central banks since the financial crisis has implied an unprecedented fall in discount rates, which has led to a massive front-loading of returns: not only for bonds, but also for equities. Does this mean you should take your profit now and sell?