【英文】瑞信报告：全球股市2020年研究展望（348页）

Very simply, Bund yields are pricing in the current PMIs and we think that they will rise by at  least an additional10 points. Inflation expectations also look too low when core CPI has risen to  1.3% and contracted wage growth has picked up to 2.7% and core service CPI to 1.9%. As  discussed above, the potential breakdown in the German coalition and a move to off-balance  sheet green-related government spending could be a game changer.

When analysing growth as a style, we use the MSCI growth indices, which classify stocks  based on the following five variables: long-term forward EPS growth rate, short-term forward  EPS growth rate, current internal growth rate, long-term historical EPS growth trend and longterm historical sales per share growth trend. Stocks are ranked on these measures and the top  50% in the regional index (e.g. MSCI US) are included in the growth index.  We went overweight European value in September but stayed overweight US growth companies, focusing on those growth stocks with low leverage and attractive FCF yields. As we explain below, it is unusual for European growth to underperform when US growth  outperforms (historically, European value has outperformed only 27% of the time when US  growth outperforms). However, owing to a different sector composition, differences in valuation  and a much stronger growth surprise in European GDP, we believe this call is justified.

US growth: stay overweight  We have been overweight US growth for many years. Despite the price of growth relative to  value exceeding TMT highs, we remain overweight for the following reasons: 1. The US cost of equity has scope to fall  We think that the cost of equity (ERP + risk free rate) in the US remains too high (8.1%). The  equity risk premium, currently at 6.3%, should be closer to 4.9%, according to our warranted  ERP model (which relies on lead indicators and credit spreads to determine where the ERP  should be). Indeed, bull markets in the past have seen much lower ERPs at this stage of the  cycle.  A 1pp fall in the ERP would more than offset a limited rise in the US treasury yield and lead to a  falling cost of equity. When the discount rate falls, long-duration assets tend to re-rate and  growth therefore outperforms.