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Global equities: Is it time to be fully invested?

It’s time to be fully invested in financial markets, not sitting on the sidelines, believes Pendal’s head of global equities ASHLEY PITTARD

EARNINGS seasons in the US and Europe have been strong, and there are signs inflation is peaking, which would allow the US Fed to slow its interest rate cycle, says Pendal’s head of global equities Ashley Pittard.

“The Fed was behind the curve in March and there was earnings risk because of high valuations.

“Fast-forward to today, the market is down 20 per cent and the price-to-earnings multiple has come back from 22 times to about 15 times earnings.”

The June quarter earnings season on Wall Street and in Europe has been solid.

On a sales basis, about half the companies beat consensus forecasts. On an earnings basis that rises to nearly two-thirds.

Not surprisingly, the response from investors has been positive.

There have been exceptions to the good news story. Consumer discretionary stocks in the US, such as Walmart and Target, disappointed.

“But when you look at this market, it’s one that you want to be fully invested in,” Pittard says.

“The US Federal Reserve has lifted interest rates sharply and is now ahead of the curve. In March this year they were behind the curve.”

Pittard doesn’t expect the Fed to continue doing 75 basis point hikes, though rates will still rise.

“We are at the point where the Fed might pause for a bit, or only has a couple of rate rises to go and earnings are growing around 5 per cent.

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Pendal Concentrated Global Share Fund

“That’s a good position for equities. That’s because the price-to-earnings multiple on Wall Street has come back to more normal levels on a historical basis.”

Pittard doesn’t expect Wall Street to fall much further.

“What you’ve seen in this quarterly earnings season is lower margins. Earnings expectations have also come down and forward guidance from companies have come down.  

“You only get massive cuts in earnings growth if you go into a sharp recession.

“That might have happened if the Fed was behind the curve. But the Fed is now ahead of the curve,” he says.

Pittard isn’t definitively calling peak inflation, but he believes it’s close, highlighting a recent drop in oil prices as evidence.

“It doesn’t mean interest rates are going back to zero again, but it does mean rates won’t keep rising,” he says.

In the Fed’s favour is time, Pittard says. The Open Market Committee isn’t meeting again until mid- September — plenty of time for new economic data.

“The Fed has six weeks leeway. It will be data-dependent going forward, and that’s important,” Pittard says.

“Something else could happen such as the war in Ukraine pushes prices back up.

“But right now inflation is peaking, there’s negative real interest rates so policy is still accommodative, there’s wages growth of 3-to-4 per cent, there’s capital spending, there’s savings built up, and there’s a bunch of initiatives from the US government which mandate spending for renewables.

“You could argue very strongly that you just want to be invested and cash levels are close to their lows.”


About Ashley Pittard and Pendal Concentrated Global Share Fund

Ashley Pittard leads Pendal’s Global Equities investment boutique. He is responsible for setting the strategy, processes and risk management for the boutique and its funds including Pendal Concentrated Global Share (COGS) Fund.

Ashley has more than 24 years of finance experience, including roles in petroleum economics, global energy investment analysis and 20 years as a global equities fund manager.

Pendal COGS Fund is an actively managed, concentrated portfolio of global shares diversified across a broad range of global sharemarkets.

Find out more about Pendal Concentrated Global Share Fund

Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management.

Contact a Pendal key account manager here.


This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current as at August 10, 2022. PFSL is the responsible entity and issuer of units in the Pendal Concentrated Global Share Fund (Fund) ARSN: 613 608 085. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections. For more information, please call Customer Relations on 1300 346 821 8:00am to 6:00pm (Sydney time) or visit our website www.pendalgroup.com

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