A memorable decade for dividends?
“We are at a pivotal moment for central banks. Should they cut interest rates? What does this mean for leadership in equity markets?
“We think in the current environment it is hard to believe central banks will aggressively cut interest rates. Two macro themes of big government and great power competition are at play, and both are inflationary. We see examples of these themes in action through central bank intervention, Covid lockdowns, and the influence on energy and food prices. Then there is the battle between liberal democracies and autocracies, the tech war, and conflicts in Ukraine and the Middle East.
“In our view, the might of these themes outweighs global disinflationary forces at play such as challenged demographics, high levels of debt and technological disruption. As such, we think the inflation genie has been released from its lamp.
“We had a long period after the financial crisis characterised by quantitative easing and lower interest rates that was good for growth stocks but not so good for dividends. But that era of ‘free money’ is over. The return to a more normal economic environment, we think, could prompt change in equity market leadership.