Market drivers poised to strengthen equity market returns
Earnings growth could revert to double-digit levels in many sectors over the next few years
For the third time since 2000 SA equities are underperforming bonds on a rolling five-year total return basis. This usually happens due to a global equity bear market, but this time many equity markets, including the JSE, are actually closer to record high price levels rather than near a bottom following a bear market. While it is very difficult to forecast equity market returns with any confidence over time frames of less than five years, we believe it is instructive to look at the market drivers and what could potentially change the recent scenario of very low equity market returns. What’s different now, and what is likely to happen next?
The equity bull cycle started after the global financial crisis in March 2009 and has just passed its 10-year anniversary. Dividing the cycle into two five-year periods shows that the total annualised returns of the first period were exceptional. However, they reduced dramatically in the second period.Considering the return drivers provides...
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