Equities: Clash of Narratives and Duration Risk

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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.
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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.
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