Equities nearing 'boiling point'
SPY•Barclays equity strategists said equities are nearing a “boiling point” as rising bond yields make them less attractive, though they remain overweight equities relative to fixed income. Global equities were less than 2% below all-time peaks, while oil remained above $100 a barrel.
1. Risks are rising
Barclays said the “There Is No Alternative” case for owning equities looks less compelling as yields rise. It cited oil prices above $100 a barrel and global central banks embarking on a tightening cycle, while noting that risks have increased as rates approach levels that have historically challenged risk assets.
2. Barclays remains constructive
The strategists said resilient growth, positive earnings momentum and an economy they see as less sensitive to higher rates than in past cycles support their overweight position in equities relative to fixed income. They said markets are likely to stay on edge until third-quarter earnings season begins in a few weeks.
