Equity and Fixed Income Valuation Fall Victims To Passive Investment
The Great Moderation should have increased the importance of company-specific forces in determining investment returns. Beating benchmarks became, however, more problematic and subsequently encouraged the attraction of passive strategies. Indexation undertaken by fixed income investors helped to produce bizarre bond market valuations in 2016 via facilitating the emergence of negative yields in certain sovereign markets. Negative expected returns and inflated valuations in sovereign bond markets enhanced the attraction of equities in 2016. Secular measures of US equity valuation are not conveying a consistent message, notably the Q-ratio. Political factors are the main threats to the current baseline P/E multiple, including a prospective change of leadership at the Fed.
DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the intention of delivering independent global macro investment insights and new thematic long-term ideas to investors, along with an agnostic opinion of the markets.
Said DeSaque has over 29 years of experience working as a professional economist in financial services, primarily based in London. His working role has involved extensive travel around the world, bringing him into contact with investors of different cultural backgrounds and investment requirements. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist and Investment Strategist at US banks Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he became Head of the London Economics Department in 1996. This role allowed him to engage with senior investment professionals, alongside regulators and provided a unique perspective of market intelligence at work.
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