From TINA to PATY
For years, global financial markets have been shaped by a seemingly simple logic: TINA, “There Is No Alternative.” The idea is that, with historically low interest rates and little yield available from safe assets, there appears to be virtually no alternative to equities. Indeed, equity markets have benefited not only from earnings growth, but also from a structurally low discount rate and a lack of attractive alternatives.
With the rise in nominal and real yields, this logic is increasingly being challenged. Bonds once again offer meaningful income and have therefore become a genuine alternative for investors. The question is increasingly whether the era of TINA is coming to an end and whether yield is becoming a competitive factor again. A new guiding principle could emerge in its place: PATY, “Pay Attention to Yields.” Competition for capital is intensifying. At the same time, higher interest rates raise discount rates and, consequently, increase valuation pressure on risk assets.
Yet while financial markets are fond of simple concepts, PATY is not a blanket argument for moving away from equities. The key question remains whether earnings growth and cash flows can justify higher costs of capital. For now, the answer remains broadly yes. The global economy remains resilient, corporate earnings are developing robustly, and structural investment, particularly in digitalization and artificial intelligence, continues to provide important growth momentum.
At the same time, equity markets have delivered a strong performance over the course of the year despite rising yields and the ongoing conflict in Iran. The current seasonally weaker phase of the year adds another element to the equation, as it is typically associated with greater market volatility. Against this backdrop, a period of elevated volatility in October would not be surprising. This would not, however, automatically signal a sustained change in market direction. As long as the macroeconomic backdrop and earnings growth remain intact, periods of weakness may instead create opportunities to establish new equity positions. PATY does not mean fewer equities. It means paying greater attention to yields, valuations, and fundamentals.
Enjoy the read.
Best regards,
Gzim Hasani, CEO
Bekim Laski, CFA, Chief Investment Officer
