A word of caution from Morgan Stanley’s equity strategists:
« The latest burst of Tech outperformance has not been accompanied by superior EPS trends. Just now Tech shows few signs of stopping (or even slowing); for example: i) post its largest 1m outperformance versus the S&P since 2012, the NASDAQ is now 2.7SD above its 12M relative average; ii) 80% of constituents of MSCI ACWI’s IT index outperformed the market over the last month, the highest breadth reading since 2003. Amid all this euphoria we’d encourage investors to keep a close eye on EPS trends as the latest burst of price outperformance has not been accompanied by EPS outperformance. »
It seems investors have started noticing.
Markets have been unnerved by rising interest rates in the US, with ripple effects around the world. The most staggering event has happened on the VIX market with a number of funds/ETNs making the headlines after having lost tons of money. What should investors take from these events ? A couple of reflections and interesting comments seen here and there. Continuer la lecture de « Putting Recent Market Sell-off in Perspective »
JPMorgan’s equity strategist team has published a report today trying to figure out if European stocks will finally break out the glassdoor of 400 points (for Stoxx Europe 600) that they have been hitting 3 times already (2000, 2007, 2015).
They argue that this time might be the time, IF a number of conditions are successfully met. Among them, earnings recovery, operating leverage, decent (!) valuations and direction of bond yields are important factors to consider. Big swing factor are FX.
Nomura expects Malaysia equities to return 4% in 2018 and says stock picking will be of the utmost importance to outperform.
The positive view from the broker stems from a number of factors, listed in a report dated Jan 22: « 1) solid macro and consumption growth, 2) continuing foreign inflows amidst positive revisions, 3) better corporate balance sheets with dividend upside, 4) possible election rally, 5) likely net buying by local institutions, 6) Malaysia’s laggard performance vs peers, 7) key concerns on banks getting addressed, 8) an appreciation MYR. »
The brokers set a 2018 year end target of 1,900 points for KLCI index.
Here are 3 slides from the latest « Where to Invest Now » published by Goldman Sachs’s David J Kostin and team. There sum up his views on US equity market going into 2018 and the most interesting one is the following, because it helps understand what an « exuberant » market would look like, if history was to repeat itself.
Despite tight or reasonable valuation, equities still make sense for JPMorgan.