Today we welcome back Director of Global Macro Jurrien Timmer for his weekly perspective on the markets. Jurrien discusses his outlook on equity risk premium, small caps, emerging markets, fed policy and many more. Jurrien comments on current market dynamic shifts saying the transition from the late-cycle to the mid-cycle is evident, characterized by robust earnings rebound and an ongoing soft-landing phase, which bolsters bullish market sentiment. He adds new bull markets are typically driven by valuation initially, with prices advancing ahead of earnings, which then follow in subsequent quarters. Jurrien touches on ERP – equity risk premium. Analyzing the current market scenario, the market is currently trading at around 21 times forward earnings, indicating a relatively high valuation. This low ERP suggests heightened market sentiment and valuation, with the market anticipating future earnings expansion. But it also indicates a limited margin for error in the market's pricing, leaving it vulnerable to economic downturns or unforeseen shocks.

Recorded on March 4, 2024.

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