Global Markets Daily: Tracking Rising Equity Allocations for Asset Owners

Research evidence excerpt

Global Markets Daily: Tracking Rising Equity Allocations for Asset Owners

Goldman Sachs Global Markets Daily

Tracking Rising Equity Allocations for Asset Owners

As we wrote in our recent Global Strategy Paper: Balancing Innovation and Inflation in

Portfolios, the value of global financial assets has had a material boost from strong

equity returns in the last 3-4 years. In fact, the performance of equities vs. bonds since

the GFC has been close to the very high ex post equity risk premia last seen during the

Golden 1920s and 1950s – and ex post equity risk premia have been above Tech Bubble

levels as equity returns have been stronger for longer. Most recently, AI capex-related

stocks globally have led equities higher.

As a result, global financial assets as tracked by our World Portfolio benchmark (see also

the proxy GSMBWP01, developed by GS Global Banking & Markets) have drifted

materially towards equities, in particular the Tech sector. Similar market value-weighted

benchmarks tend to influence investor asset allocations as size indicates importance and

liquidity of assets. Thus, prolonged trends in asset performance are not just driving

shifts in global financial assets but tend to be a key driver of investor asset allocations. In

this Global Markets Daily we track changing asset allocations for asset owners globally

and investigate the drivers.

Exhibit 1: Equity risk premia have been among the strongest since the Golden 1920s and

1950s

10-year rolling annualised equity vs. bond performance (ex post equity risk premia)

20%

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

-2%

-4%

-6%

-8%

-10%

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

US World portfolio

Source: Robert Shiller, Datastream, Haver Analytics, Goldman Sachs Global Investment Research