Below is a publication from Citi’s global equity strategy team. QE, financial repression, and a global snapshot of valuations…oh, and corporate payout mixes too!
Here are a few charts and quotes from the piece:
Ultra-low Interest Rates — Policy-makers have adopted aggressive methods to push interest rates and bond yields down to unprecedented levels. It is hoped that these low rates will trigger a stronger recovery in corporate capex and jobs. Evidence of this remains sketchy.
Global Search For Yield — Unprecedented monetary policy has created a global search for yield. Reasonable dividend yields have attracted some of this income seeking capital into the global equity market.
Implications For Policy-Makers — Income-seekers are more interested in dividends and share buybacks than financing capex and job creation. They may be reducing the pro-growth impact of QE.
Implications For Companies — Those CEOs who do not give this income-seeking capital what it wants may find themselves replaced by a CEO who does.
Implications For Investors — While the outlook for future economic growth remains uninspiring, global equities should remain supported by dividend yields and share buybacks. Subdued capex means that profitability mean-reversion is not imminent. Within the equity market, income strategies should remain popular.
Download the PDF here: