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The End Of A Cult

- Equity Cult — "Global pension funds spent the second half of the 20th century raising their equity weightings to well over 50%, mostly at the expense of bonds."
- Cult Reversed — "It has taken 10 years, and two 50% bear markets, to reverse this cult. European and Japanese equities are already trading on dividend yields above government bond yields. US equities are almost there as well. An immediate reincarnation of the equity cult seems unlikely."
- Equity Overhang — "Global corporates, especially the mega-caps, rushed to exploit cheap financing as the equity cult inflated. They have been slow to redeem equity now that the cult has deflated. Equity oversupply remains a drag on share prices."
- De-equitisation The Answer — "As conventional investors sell, so corporates have stepped in as the marginal buyer of global equities. Investors should tilt portfolios to exploit de-equitisation themes such as M&A and share buy-backs."
- Emerging Markets The Exception — "The Emerging Markets equity culture remains robust. Companies can issue equity, capex is booming, and large-cap stocks are not under shareholder pressure to break up. Enjoy it while it lasts."

Citigroup_Global_Equity_Strategist_20100901

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