While the Fed and the BoE are preparing to embark on a moderate hiking cycle next year, the reaction functions of the Bank of Japan and the ECB are still shifting in a more dovish direction. This kind of monetary policy divergence is pretty unusual and we expect it to be one of the major market themes in the foreseeable future. One can expect the dovish side of this divergence to exert continued substantial easing pressure on global liquidity conditions.

## Net debt to equity (non-financial sector)


_Source: Datastream, ING IM (November ’14)_

## Large companies have strong balance sheets

It is remarkable to see the financial strength of non-financial companies. In the US the period of balance sheet deleveraging is clearly over. In this region we even observe a renewed increase in debt levels, although still far from the levels seen before. We think that part of this rise is a consequence of the high equity buybacks in order to maintain return on equity (ROE) levels and artificially pump up the earnings-per-share figure. This strategy still makes sense from a pure financial point of view taking into account the low cost of debt relative to the higher cost of equity. However, the impact will gradually fade as companies are currently buying back shares at above-average valuations. 

## Balance sheets and cash flow bode well for dividends

This bodes well for shareholder rewards in the form of dividends and buybacks. We expect that in 2015 total shareholder compensation will keep pace with the trend in earnings. This implies around 7% growth in the US and 11-12% dividend growth in Europe and Japan. Investors who are searching for yield and willing to take on some volatility should consider buying equities.