Where (Long-Term) Equity Opportunities Exist, Despite The Near-Term Economic Setup

Per their latest commentary, MRB remains bullish overall on the economy (i.e., no recession in sight, growth continuing, yada yada), however they're very cautious on US equities longer-term. Below are the opening two paragraphs which (diversifying outside of "frothy" US stocks) jibes with our current long-term thesis. Although the external dollar tailwind (per the potential setup involving stable coins over the coming years [a topic for another day]) may not be quite as prevalent as we originally thought:

"The secular bull run in U.S. equities that began in 2009 is now very extended. While a bear market catalyst is still absent, current pricing implies that returns will be much lower in the coming decade. Global equity investors should be selective and diversify away from the frothy areas of the U.S. market.

Most investment strategy is focused on the cyclical trend in asset prices (i.e. the swings within a single economic or business cycle). However, it is helpful to periodically step back and analyze the underlying secular trend, which spans across several economic cycles. A firm understanding of where a given asset class is within the secular trend is paramount for longer-term investors, but also serves as a useful roadmap for those that manage more dynamic portfolios since it provides a sense of the underlying tailwinds/headwinds."

Here's more... It's interesting how analysts can differ on the macro trends (we're not quite as sanguine on the economy going forward as is MRB), yet we are largely in agreement on where opportunities lie:

"A reduction in labor unionization, increased globalization, deregulation, lower corporate taxation, and technological advancements have all allowed the corporate sector to capture a disproportionate share of economic growth in recent decades. However, these trends are now extended and/or cresting/reversing. The four-decade era of steadily falling inflation and bond yields is also over and most underlying drivers of inflation are pointed upward (table 1), which poses a material threat to those parts of the equity market with rich valuations.

In short, investors should expect low returns for the aggregate U.S. benchmark over the next decade or two, consistent with the conclusions of the MRB Long-Term Returns report. That said, there is a major divergence underneath the surface, with U.S. growth stocks now extremely elevated compared with their history and priced for perfection, while their value counterparts have lagged and offer appealing relative valuations.

In contrast with the U.S. benchmark, global ex-U.S. equities have only recently emerged from a secular bear market, as real stock prices have generally traded sideways since the late-2000s. In turn, they offer substantial relative performance potential over the next decade, and potentially in absolute terms as well, as earnings trends strengthen, which is consistent with our current investment strategy bias. U.S. dollar weakness will aid this rotation."