The global head of equities at insurance broking and risk management giant Marsh has urged investors to prepare for a potential end to the four-year bull run. Rich Dell’s warning attributes this risk to escalating bond market chaos and surging oil prices, increasing the likelihood of an equity correction. Marsh is an insurance broking and risk management giant, advising on approximately $US16.2 trillion in assets across risk, reinsurance, and capital management services. This alert follows a 1.6 per cent pullback in the S&P500 and a 4.4 per cent decline in the local sharemarket to a three-month low, with Brent crude above $US105 a barrel and Australian 10-year bond yields at a 15-year high.
Elevated energy prices are fuelling inflation expectations, leading to anticipated interest rate hikes from both the US Federal Reserve and the Reserve Bank of Australia; markets price an 84 per cent chance of an RBA hike to 4.6 per cent this month. These pressures intensify bond yields, further impacted by global government debt and rising corporate debt for AI development, like Alphabet’s $5 billion Australian bond issuance. Dell believes that despite the S&P500’s ‘phenomenal’ earnings growth, largely from the ‘Magnificent 7’, the combination of potentially unsustainable earnings, soaring bond yields, and higher oil prices could trigger a correction.
In contrast, BlackRock global chief investment strategist Wei Li has returned to an overweight recommendation for emerging markets, arguing higher rates and strong equities can coexist, citing semiconductor booms in South Korea and Taiwan, and Brazil’s resource exposure. Domestically, UBS equities strategist Richard Schellbach suggests only energy and utilities sectors on the ASX benefit from higher rates, with real estate and retail facing significant headwinds. Developers Stockland and Mirvac, alongside Wesfarmers, JB Hi-Fi, and jobs platform Seek, are expected to suffer earnings pain from RBA rate increases. Hedge fund Ten Cap’s Jun Bei Liu confirmed a short position against Stockland, anticipating lower residential settlements and margins amid rising borrowing costs.
