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By Michaël LOK, Group CIO Co-CEO Asset Management, Union Bancaire Privée (UBP)
As the turbulence stirred up by Donald Trump begins to settle, the markets are turning their attention back to economic fundamentals. This return to a more academic reading of the market’s dynamics has seen the re-emergence of a key signal: the risk premium on US equities is falling, whilst being set against an environment marked by high long-term rates and an earnings growth that is running out of steam. This tightening of the risk premium is weakening the sustainability of the market rally in the US.
Risk premium under pressure
Since the end of the pandemic, the implicit risk premium on the SP 500 has steadily...
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