Part 5 : Equity markets: set to rise further?
High risk premia on equities should enable these assets to perform well amid fiscal stimulus and a growth rebound.
Equity indices have already recovered much ground but implied volatility remains high, indicating that investors still have concerns over market developments and that markets, despite their lofty levels, probably have further to go before overreaching.
We prefer European and emerging-market equities to US stocks, as we believe they have relatively more attractive valuation levels and greater potential for earnings rebounds. Furthermore, emerging equities could benefit from the rise in commodity prices, while probable tax increases can be expected to penalise the largest US market capitalisations.
The continued upward movement in interest rates represents a powerful supportive factor for value stocks, which are those most exposed to an economic recovery and are also trading relatively attractively. Discounted small-cap stocks compared to their large-cap counterparts could also provide buying opportunities.
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The opinion expressed above is dated January 2021 and is liable to change. Latest available data as of publication date.
This document is not pre-contractual or contractual in nature. It is provided for information purposes. The analyses and descriptions contained in this document shall not be interpreted as being advice or recommendations on the part of Lazard Frères Gestion SAS. This document does not constitute an offer or invitation to purchase or sell, nor an encouragement to invest. This document is the intellectual property of Lazard Frères Gestion SAS. LAZARD FRERES GESTION – a simplified joint stock company with share capital of €14,487,500 – Paris Trade and Companies Registry No. 352 213 599. 25, RUE DE COURCELLES – 75008 PARIS, FRANCE
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