“Stock indices trade ahead of their fundamentals” by Blackfort CIO Dr. Andreas Bickel

Stock indices trade ahead of their fundamentals. The distance between the 200-day average is in most cases lager than 10%. It is high time that we see a correction or at least a consolidation.

But after a zero growth of US earnings in 2019, analysts expect a modest pick up in 2020. Economic indicators do confirm this scenario. Therefore, it is to early to call the end of this hated bull market.

I’d rather bet that we will see “buying the dip” over the coming weeks. The dilemma where to invest is ongoing. There are no undervalued assets. US high yields, in the old time called junk bonds, have a yield to maturity which is on average below 5%. REITs have due to low interest rates and flight to real assets as well risen sharply.

Having said that I would still argue that we see first a bubble accompanied by euphoria. In the late nineties PE ratios in the broad US market were above 25, now we are still below 20. There is room for more multiple expansion.

Source: LinkedIn

Published: 21/01/20 by Blackfort CIO Dr. Andreas Bickel

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