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Alphinity’s style agnostic process, premised on earnings leadership, has allowed us to opportunistically tilt our Australian and global portfolios to the more cyclical part of the market by following the earnings leadership change over the last six months and continuously adjust our exposure to benefit from changing market and macro trends.
DRIVERS OF EQUITY MARKET RETURNS CHANGES DURING MARKET CYCLES
Equity market returns are normally driven by a combination of earnings growth, rating changes (multiples moving up/down), dividend growth and FX adjustments. The contribution of each varies, depending on the economic and market cycles we are in.
Research by Goldman Sachs on historic equity cycles, suggests that nearly every equity market cycle can be split into four distinct phases: hope, growth, optimism, and despair. The extraordinary returns of 2019 were consistent with the classic ‘optimism’ phase that tend to play at the end of a prolonged bull market, with most of the