EQUITY ANALYSIS

An economic slowdown paired with rate cuts, absent a profit recession, is great for equities. Even if earnings multiples compress, falling borrowing costs and resilient earnings support stocks. A weaker dollar adds another lift. Corporations can further boost ROE by leveraging balance sheets, as long as sales-to-assets and earnings-to-sales hold. In that case, easing monetary policy improves shareholder returns even with flat top-line growth. This is why equities are rallying.