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