L&G believes equities are at historically low levels

Steep falls in equity prices have left valuations at a level where stocks should now outperform bond...

Steep falls in equity prices have left valuations at a level where stocks should now outperform bonds, according to Legal & General Investment Management. The group believes risk premia on global markets are also at historically favourable levels. 'With the FTSE 100 trading around 4,000, we believe the market offers a prospective equity risk premium of around 4.25%, with medium-sized and smaller companies offering an additional return to compensate for reduced liquidity,' John Monckton, director of bonds, said. This implies a prospective real return of 6.5%-7%, assuming inflation of 2....