The global AI trade should make a nice comeback now that the latest issue of The Economist sees the bottom falling out of it:
The weekly financial magazine, famous for its contrarian cover stories, also recently picked the top in global bond yields when it ran a cover story titled "Will bonds blow up?" in the October 10-16 issue. Then again, bond yields rose worldwide last week. Central bankers sounded more hawkish, and inflation remains sticky. Bond investors expect more monetary policy tightening ahead.
Stock markets barely moved last week. Global profits are booming, yet valuations keep falling, almost everywhere. We think they are at or near a bottom. Gold continues to falter, and China’s problems are depressing stock prices there. Here’s more:
I. Stock Market Derby
The US has held its ground in November. The US MSCI’s share of the All Country World MSCI’s market capitalization is 65.3% (chart). The Europe MSCI’s share is 13.5%. The Emerging Markets (EM) MSCI’s share has slipped to 11.0%.
The US MSCI’s share of global forward earnings hasn’t kept pace. It has edged down to 54.1% from 54.3% two weeks ago, well below its market-cap share (chart). The EM MSCI’s earnings share has climbed to 20.6% even as its market-cap share has fallen. Investors are pricing the South Korea and Taiwan MSCIs at historically low multiples.
