The rebound in financial markets reflects strong optimism among market participants that real and nominal economic growth and inflation are about to get stronger in the coming years. This view has supported a sharp rebound in valuation ratios (see chart above). At the same time, USD has continued appreciating against most currencies, and the fixed income market has consolidated on the back of rising yields. Lire la suite
Maybe both actually… Lire la suite
A very good read to recap 2016, the « RIC » report from Bank of America Merrill Lynch. The returns in the above tables are in dollar terms if I’m not mistaken.
Global and regional macro backdrop is improving, investor sentiment is getting more bullish, EPS have turned the corner and are now on a more positive trend… No surprise European equities finished 2016 in a pretty better shape than they started it. Is the rally going to continue in 2017 ? Well, the mood is there and some brokers have decided to add some fuel to it.
This morning, Deutsche Bank and Merrill Lynch raised their SXXP y/e target to respectively 375 (from 345) and 390 (7% upside). Drivers for upside: accelerating growth, higher earnings revisions and EPS growth (11% for 2017e vs 7-8% previously at Merrill), forward P/E of 15x (stable from current level).
One of the latest publication on X-asset strategy comes from Morgan Stanley and the message is pretty grim:
« Our cycle indicators across DM have stalled, pointing to rising risks of a shift from ‘expansion’ to ‘downturn’. The dilemma is that this peak has characteristics of both ‘true’ and ‘false’ turns. We explore our cycle checklist. »
Another good chart from Morgan Stanley most recent « Cross Asset Playbook », there are tons of useful and valuable material in there, this is just a selection (see previous post as well).
Well, the markets are heading into panic mode, again. Brace yourself ! Lots of opportunities will probably arise, but wait a little, that dust settles down before chasing quality stocks at discounted prices, because right now, the market is still expensive and most quality stocks trade at a premium…
For those investors who did not have time to read all Morgan Stanley’s reports about ECB QE and its impact on asset classes, here’s the summary of the summary.
And obvisouly, the equity market doesn’t seem to care (although that’s partly true). From SocGen’s quant team (one of the greatest read coming from a broker).
As shown in a report published today, SocGen reminds us that Eurozone equities have been a very nice performer over the last 30 months and « trade on an aggregate at P/E premium to the rest of Europe and the rest of the world ». The question they ask therefore is: « Where is the equity upside, if any, from ECB QE? »
First off, the rebound in EZ equity market has 2 reasons: the level of equity indices after the market crash of 2008-2009 and then after July 2012, the main driver of EZ equity rebound was of course multiple expansion, or, its equivalent, market risk premium compression. Lire la suite