Fear that interest rates in major economies will stay relatively high is creeping back and threatens a painful wake-up call for financial markets, big...
LONDON - Fear that interest rates in major economies will stay relatively high is creeping back and threatens a painful wake-up call for financial markets , big investors warn.
Amundi, Europe's largest asset manager, said in a note on Monday that U.S. stocks will lag globally for the next decade. It expects the equity and debt of companies in developing nations such as high-growth India and mineral-rich Chile and Indonesia to outperform. But up for reassessment is the discount rate investors plug into company valuation models, which follows long-term U.S. rate expectations. A one percentage point rise in this yardstick depresses the present value of companies' future earnings by 10%, accountancy firm EY estimates.Wall Street's S&P 500 index, which influences equities worldwide, is priced 32% above fair value based on long-term rate forecasts, says Vanguard, the world's second largest money manager.
Markets are pricing fewer than two Fed rate cuts this year. The first European Central Bank cut is priced for June, but traders have reduced bets for how far it can go. The shift towards high long term rates becoming embedded in traders' thinking is "yet to come", Lemaigre added.
Fed Funds Rate Global Stocks Asset Manager Financial Markets Discount Rate U.S. Federal Reserve Blackrock Investment Institute Investors International Monetary Fund
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