Equities need to compete with bonds, and earnings will be the key

Jack Ablin, CIO of Cresset Wealth Advisors, appeared on “Cavuto Coast to Coast” on Fox Business Network on October 12, 2018 to assess the turbulent week in the US equity market. He believes that equities will have to start pulling their own weight as interest rates normalize, because stocks will again have to compete with bonds for the attention of asset allocators; valuations will need to be more compelling as rates rise. Jack emphasizes that the overnight rate is too low relative to economic conditions: the Taylor Rule suggests that the overnight rate should be closer to 5 per cent, not today’s 2.25 per cent. He also points out that the ECB will end its QE program at the end of this year, which will remove an artificial cap on US rates. Jack highlighted that the value of bonds globally trading below zero has fallen from more than $12 trillion in 2016 to $6.3 trillion in September, and this number will continue to shrink sharply.

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Cresset is an independent, award-winning multi-family office and private investment firm with more than $45 billion in assets under management (as of 04/01/2024). Cresset serves the unique needs of entrepreneurs, CEO founders, wealth creators, executives, and partners, as well as high-net-worth and multi-generational families. Our goal is to deliver a new paradigm for wealth management, giving you time to pursue what matters to you most.

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From Chief Investment Officer, Jack Ablin.
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