stock markets

Valuation is often not the immediate trigger for a stock market turnaround. But it is a decisive factor in the amount of upward or downward potential for the market.

Re-rating

Since its low point in mid-June, the S&P 500 Index has risen 18 per cent. Over the same period, earnings per share rose by less than 2 per cent. There has thus been a considerable re-rating of equities over the past two months.

Forty years ago this week the bull market started in the United States. Not just any bull market, but the biggest bull market ever. Despite the crash of 1987, the dotcom graveyard, the attacks of 11 September 2001, the Great Financial Crisis and the Covid pandemic, this bull market continued to rise, fuelled by structurally falling interest rates, higher valuations and sharply rising profits.

The Dow Jones bottomed forty years ago on 12 August 1982 at 777 points, the same level as in January 1964. 

Every year there are surprises at the trade fair, although there seem to have been more in 2021. A surprise is something that the vast majority did not expect. That is the reason why surprises can set a stock market in motion. When almost everyone is convinced of something, it is discounted in the stock prices. These were the biggest surprises of 2021.

Traditionally, the first outlooks for the coming year trickle in from September onwards. With sometimes a quarter of a year still to go, strategists start relating their vision of the economic and financial themes that await investors in the next calendar year. The big question is which investors have actually hit the mark in their outlook for 2021. The reckoning. 

Since the 1980s, a balanced portfolio has been a great alternative to a full – highly offensive – equity portfolio. A balanced portfolio typically consists of 50 percent stocks and 50 percent bonds, although the children of the bull market have gradually stretched the stock weight to 60 or even 70 percent.

The US stock market is always more expensive than other markets. However, America’s premium over Europe is now so high that betting on Europe may be a better option for investors, according to Joost van Leenders, who explained Van Lanschot Kempen’s outlook during a recent interview by Fondsnieuws, Investment Officer Luxembourg’s Dutch-language sister publication.

Keith Ney of Carmignac has said stock markets are still in a favourable climate. China remains an interesting country in which to invest, both for equities and bonds.

Ney joined the Strategic Investment Committee of Carmignac in April 2021. He has developed particular expertise in bonds and their place in a portfolio. His long career with the French manager has given him expertise in both equities and bonds. In addition to his role on the committee, he is direct co-manager of the Carmignac Patrimoine Europe fund.

It’s less than six weeks to the US presidential elections. Capital Group has made a few rules of thumb for investors to give some guidance.