This week we examine some worrisome characteristics of the U.S. market. According to Liz An Sonders of Charles Schwab, global monetary conditions remain equity market friendly, but pending U.S. rate hikes may change perception about market valuation. Gavyn Davis, columnist for the Financial Times, notes increasing grounds to worry about the sustainability of the market’s advance, and Mohamed El-Erian comments on what the jobs report means.
Trampled Under Foot: Earnings Estimates Crushed; But Not Stocks. History shows that market valuation doesn’t necessarily matter…until it does. The tough part is trying to gauge what might trigger the tipping point. Global monetary policy conditions remain very equity market friendly; but pending US rate hikes will likely change the backdrop. Todays’ weak earnings growth could regain the spotlight, according to Liz Ann Sonders of Charles Schwab.
Reasons to worry about U.S. Equities. According to Gavyn Davies, columnist for the Financial Times, there are increasing grounds to worry about the sustainability of the market’s advance for the rest of the year. The fundamental drivers are now less convincing than before. With overall profits growth decelerating, about three-quarters of the rise in US equity prices in the past 12 months has been due to a rise of the market’s price/earnings ratio. This has taken market valuations into fairly expensive territory compared to long term history. Financial Times ‘Wow Jobs Report’ Sets Stage for Rate Hike. They key takeaway of the February jobs report released Friday is that this is the 12th consecutive month of more than 200,000 added jobs, according to Mohamed El-Erian. It is highly significant because it opens the way for a rate hike by or at the September meeting, according to Mohamed El-Erian. Ordinarily a cautious commentator, he was not deterred in his optimism by the “blemish” of anemic wage growth. He said “it will come with these strong numbers, so it’s just a matter of time.” We hope you enjoy reading these articles along with us and that you find them informative. Please forward this to your friends and family. J. Mark Nickell & Co. Disclosure – The articles mentioned in This Week with J. Mark Nickell & Co. are for information and educational purposes only. They represent a sample of the numerous articles that the firm reads each week to stay current on financial and economic topics. The articles are linked to websites separate from the J. Mark Nickell & Co. website. The opinions expressed in these articles are the opinions of the author and not J. Mark Nickell & Co. This is not an offer to buy or sell any security. J. Mark Nickell & Co. is under no obligation to update any of the information in these articles. We cannot attest to the accuracy of the data in the articles.
