Why Canaccord Genuity is still underweight equities

ON ASSET ALLOCATION

The FTSE 350 has risen by 40% since its October 2011 lows while earnings expectations have actually fallen.

Global quantitative easing (QE) has valorised equity prices by forcing investors to accept lower compensation for equity risk, while doing very little for their fundamental value. Many academics are now sceptical on the ability of QE to stimulate growth; it seems to have done little more than put a floor under asset prices. The risk is that Mark Carney’s caveat-heavy ‘forward guidance’ does little more than stimulate the kind of consumer credit growth that has typified UK recoveries of old. That is not the kind of economic rebalancing required for a sustainable economic recovery, alth...