Investment insights Animal spirits and the coming balance sheet bonanza

'Animal spirits' seem to have returned to the equity markets. Can rising dividends and share buybacks provide additional support to global equities in the coming months?

22 Jan 2018

Robust corporate balance sheets, strong profits growth and rising corporate confidence make a powerful combination.

Can rising dividends and share buybacks provide additional support to global equities in the coming months? Investment Insights investigates.

  • ‘Animal spirits’ have returned; still significant supports to equities eight years into the bull market as economic growth momentum broadens
  • We expect equity returns broadly in line with earnings growth in 2018; returns therefore likely to be above-average but below 2017
  • We believe there is material on-going support for high equity multiples from low rates and from low economic, interest rate and earnings volatility
  • We see an additional boost to equities in 2018 from increasing distributions to shareholders
  • Main risks to global investor risk appetite are faster-than-expected pace of monetary policy tightening, trade protectionism and hard landing in China…
  • …but in aggregate the supports to global equities are broadening not narrowing

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