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Outlook For Public Equities More Attractive

AIMCo’s ‘2023 Long-Term Asset Class Assumptions’ expect many countries to experience above-target inflation and tight monetary policy from central banks. While it anticipates an inflation decline this year, it will potentially remain at higher levels than witnessed prior to the pandemic. Government bond yields, over the forecast horizon, are expected to remain relatively high, at levels closer to the ones seen before the Global Financial Crisis. Given market developments over 2022, the outlook is more attractive for public equities over the next decade in comparison to last year’s forecast. On the valuation side, price-to-earnings (P/E) ratios have improved from last year, more in line with their long-term average, if not lower in some cases (i.e. there is room for multiple expansion). Earnings growth is expected to remain healthy due to a combination of increased support from the inflation pass-through and robust demand globally. Illiquid assets continue to exhibit high return-to-risk ratios. Overall, current private asset valuations are less expensive in comparison to last year, resulting in a reduced drag on returns. While illiquid real assets can be significantly impacted by macroeconomic factors such as inflation and real yields, they can also provide a degree of protection against inflation as these investments can pass through a portion of inflation to end-users.

Bill Prohibits Investments

A private member’s bill would prohibit the Canada Pension Plan Investment Board from making investments in entities that have committed human, labour, or environmental rights violations, says an Aon ‘Radar.’ Bill C-315, An Act to amend the Canada Pension Plan Investment Board Act (investments) has received first reading. It also prohibits investments in firms that have produced arms, ammunition, implements, or munitions of war prohibited under international law and ordered, controlled, or otherwise directed acts of corruption under the Criminal Code or the Corruption of Foreign Public Officials Act. However, as a private member’s bill, it may not have the support required to become law.

For details on these stories, visit www.bpmmagazine.com

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