U.S. Equities: Multiple Concerns
U.S. equity buyers should beware the perils of price.
U.S. equity buyers should beware the perils of price.
Despite the pawing of the bulls and the roaring of the bears, current corporate earnings growth is right about where one would expect it to be following a recession.
Following the recent nine-month sprint, the lowest-quality bonds are fatigued and overvalued, while higher-quality bonds appear to have more stamina. Investors, however, should take note of the exit signs.
The current rally in U.S. equities is strikingly similar to the Nikkei’s ill-fated surge of 1993, reinforcing our belief the bear market has yet to run its course.
Not since the oil shock of the early 1980s has a single sector accounted for such a large percentage of market earnings—what does this mean for investors?
Pension fund deficits, which remain heavily concentrated among a handful of firms, are just starting to impact the bottom line, while the longer-term implications for all investors may be a shift in asset allocation.
Despite the steady stream of financial scandals and revelations of conflicts of interest on Wall Street, the game of beating analyst projections continues.
Given the explosiveness of past bear market rallies, investors should rebalance instead of sitting in cash or assuming a prospective rally represents the start of a prolonged recovery.
Commodities could provide valuable portfolio protection in the event that central banks, focused on using liquidity to fend off deflation, incite a bout of unexpected inflation.
Using normalized earnings to value U.S. equities suggests they remain overvalued.