Have we now seen the peak of the US growth cycle? US economy losing momentum going into the US presidential election.
Despite inflation approaching Fed’s target level the issue has been the absence of real US household net worth growth
Growth has continued to outperform Value. Small cap has marginally outperformed large cap over three months but saw negative returns in January.
Growth sees a 5yr annualized return of 17.9% vs 10.7% for value.
Markets rein in expectations over the size and tempo of US rate cuts in 2025.
After declining significantly in Q3, US market 12 month forward interest expectations have risen 60bps from the lows of 2.8% at the end of September.
US absolute 12m forward PE still 11% below peak level but US relative PE hits record high in October of 59% vs Global ex US.
A US CAPE at the current 33.5x implies subsequent 10-year annualised US returns in the low single digits.
Double-digit US EPS growth is forecast in 2025 with significantly less distortion from the Mag 7 vs this year’s forecasts.
Although double-digit US EPS growth is forecast for next year, revisions to underlying 2025 US EPS estimates have turned negative in recent months.
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