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10k Words Equitable Investors April 2025 Apparently, Confucius did not say "One Picture is Worth Ten Thousand Words" after all. It was an advertisement in a 1920s trade journal for the use of images in ads on the sides of streetcars... Passive investment in global equities appears to have continued on while active flows remain negative and foreign demand for US stocks reverses sharply. But in the US, momentum was the winning factor in the past volatile week and month, a factor small caps have been lacking, with small cap earnings growth over the past decade generally not accompanied by multiple expansion. Credit spreads have been on the rise and the correlation between credit spreads and the valuation of equities has also been increasing. The post-tarrif volatility has cut back the forward PE on the ASX sharply BUT it is worth bearing in mind that the ASX's largest companies were established in a more distant era than the dominant companies in the US, where multiples are higher. On the US - inflation was retreating nicely prior to the tarrifs but consumer confidence is at GFC levels. Finally, we divert to look at online penetration of lottery sales around the world. Flows into global equities 
Source: Goldman Sachs Foreign official demand for US stocks 
Source: Reuters, Charles Schwab US equity market factor performance as of end of last week (ETF factor proxies) 
Source: Koyfin, Equitable Investors Strong earnings growth for small caps but their returns lagged as their valuation multiples remained more or less the same (2015-2024) 
Source: Robeco ICE BofA US High Yield Index Option-Adjusted Spread 
Source: FRED Relationship between the S&P 500 forward PE multiple & credit spreads 
Source: UBS US & Australian government bond yield spreads (10 year v 2 year) 
Source: Koyfin ASX forward PE multiple 
Source: Evans & Partners Australia's largest companies from a different era to the US 
Source: Owen Analytics Forward PE on US equities 
Source: Evans & Partners US core inflation had been falling sharply 
Source: Bloomberg US consumer confidence drops to GFC levels 
Source: Wilsons Advisory Online penetration of lottery sales Source: Jumbo Interactive (ASX code: JIN) April 2025 Edition Funds operated by this manager: Equitable Investors Dragonfly Fund Disclaimer Past performance is not a reliable indicator of future performance. Fund returns are quoted net of all fees, expenses and accrued performance fees. Delivery of this report to a recipient should not be relied on as a representation that there has been no change since the preparation date in the affairs or financial condition of the Fund or the Trustee; or that the information contained in this report remains accurate or complete at any time after the preparation date. Equitable Investors Pty Ltd (EI) does not guarantee or make any representation or warranty as to the accuracy or completeness of the information in this report. To the extent permitted by law, EI disclaims all liability that may otherwise arise due to any information in this report being inaccurate or information being omitted. This report does not take into account the particular investment objectives, financial situation and needs of potential investors. Before making a decision to invest in the Fund the recipient should obtain professional advice. This report does not purport to contain all the information that the recipient may require to evaluate a possible investment in the Fund. The recipient should conduct their own independent analysis of the Fund and refer to the current Information Memorandum, which is available from EI. |
