Equities: Clash of Narratives and Duration Risk

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist, CME Group

Equities: A Clash of Narratives

• Equities sway to competing narratives – reopening or financial distress.
• Can oil prices stabilize amid supply cuts to offset demand decline?
• Will inflation surge amid ballooning deficits and central bank assets?
• Shortages could lift some product prices, but overall a net decline is likely.

The Duration Risk in Equities

• Equities have rallied since 2017 but dividend growth has declined.
• Dividends impacted by fall in long-term interest rates since Q4 2018.
• Equity market returns top Treasury yields despite cuts to dividends.
• Equities could benefit if long-term rates stay low or fall even lower.