Europe is off an average 0.7% after Asia did a make-over of the Red Sea. China lost 6.7% as credit is tightened. The Shanghai index lost 23% in the last four weeks. The Wall Street Journal published an article titled: Peak Theory in Government Bonds. Well hidden though, on page C2. So, not very important for the investment community. Is this a reason to be bullish on rates?
Over to the US. The S&P 500 is going for 4.0% real economic growth in the coming year. It is far from impossible to see that, but the odds are low — less than 20% in our view. An unprecedented eight point P/E multiple expansion during a five month based rally has left the market at its most expensive level (25x on operating, 130x on reported) in seven years. On a reported basis, this market is nearly three times overvalued as it was during the tech bubble!
The markets are trading as if we are in the second half of a recovery phase while there is not enough support to state that the recession is over. Dangerous stuff.
London is closed today. So if the US manages to stay in the black, London may open unchanged of higher tomorrow. If so, than the rest of Europe will rally.
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Over to the US. The S&P 500 is going for 4.0% real economic growth in the coming year. It is far from impossible to see that, but the odds are low — less than 20% in our view. An unprecedented eight point P/E multiple expansion during a five month based rally has left the market at its most expensive level (25x on operating, 130x on reported) in seven years. On a reported basis, this market is nearly three times overvalued as it was during the tech bubble!
The markets are trading as if we are in the second half of a recovery phase while there is not enough support to state that the recession is over. Dangerous stuff.
London is closed today. So if the US manages to stay in the black, London may open unchanged of higher tomorrow. If so, than the rest of Europe will rally.
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