One week / one topic: Harder, better, faster, stronger

What happened?

There seem to be no bears left.

The (US) data have spoken – with unemployment falling and earnings absolutely ok so far – plus China’s monetary base is growing once again.

The result, as per a recent poll of global investors? Growth expectations have risen sharply and only 8% expect a hard landing.

(Remember, ~15% here represents the agnostic, unconditional probability given that recessions happen roughly every seven years on average)

The obvious trade? But of course… buy equities and sell bonds!

The problem? Equities in aggregate look very expensive, and yet prices keep going up.

Is this an aberration that will be corrected, probably in an unexpected and sharp manner?

Or have we perhaps entered a new regime, with investors comfortable paying significantly more for equity exposure?

Our observations