Get ready for another global equity rotation

ZURICH: Tightening financial conditions will likely lead to a ‘phase change’ in global markets in the second quarter, resulting in lower overall returns and favoring growth stocks over value, according to UBS Group AG.

A shift from a liquidity-driven market to one based on growth and earnings will come as inflation enthusiasm peaks and will precede any tapering of Federal Reserve support, wrote strategists including Bhanu Baweja in a note. This regime change will be marked by a bottoming in real rates and credit spreads - which will signal the end of the liquidity “tailwind, ” they said.