Exciting new episode of Coolabah’s Complexity Premia Podcast out now!

Joye: Equities set for a “terrible” decade

Chris Conway from Livewire Markets writes that when you’re running north of $8 billion of investor capital in the bond market, you have a vested interest in highlighting the benefits of bonds over other asset classes.  

Coolabah’s  makes no bones about promoting bonds over equities but he backs it up with evidence. 

That evidence comprises the S&P 500’s current cyclically adjusted PE of 31x. Not only is that high when compared to the average since 1880 of 17x, but it also is a harbinger of tough times ahead. 

“When we research what happens to equity returns once the PEs pierce 30x we find that the future 10-year returns are absolutely terrible. So most of the time, inflation adjusted, equity returns are negative in the decade after the PE punches through 30x”.

It’s one thing to highlight problems, however it’s another thing altogether to provide solutions. 

In this Expert Insights, Joye runs the ruler over his opportunity set and highlights not only which areas of the bond market he likes, but also those that he wouldn’t currently go near. 

He also shares what sort of returns investors should be expecting and why liquidity is so critically important for Coolabah’s investment style. 

Please note that this interview took place on 13 September, 2023

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