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2014 Global Market Outlook - US

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发表于 2014-1-25 00:50:37 | 显示全部楼层 |阅读模式
本帖最后由 理财投资Aurora 于 2014-1-27 13:47 编辑

Equity -- US

US has been in bull market since 2009 for consecutive five years now, though only in March 2013 major indices regained the same levels as prior to 2008 market crash. That is 50% drop in 2008, 100% gain from 2009 to Mar 2013. Huge amount of money could be made during that period time. Now the question is when will be the next market crash.

S&P 500 currently is trading at 17 times 12 month trailing earnings (P/E ratio 17), close to long term average and equilibrium. This means stocks are close to their fair value and to be crossed over to overprice territory. Historically biggest market decline have happened in the 16-18 valuation range; largest gain also occurred within this range. Thus increased caution should be warranted. Recent equity market advances are largely driven by expanding P/E through removing the credit risk factor, but earning growth has been moderate for some times. 90% globale conomy is expanding, which provide supportive macro environment for corporations’ earning to start picking up. It will need the earnings to pick up for equity market to continue advancing. Because the price is close to fair value, market will be more volatile with more moderate return and more frequent pull backs.

Historically most bull markets end when corporate management team are optimistic, mergers and acquisitions are rampant, capital expenditure and inventories are high, labor markets are tight and inflations are higher. In current environment, none of those signs are present. US economy is still expanding and has not peaked yet. With QE taper expected to happen, fixed income will still suffer. Currently still recommend overweigh equity, underweight fixed income. Only after interest rate (getting close to) normalized, this setup should start reversing.

Political environment is not helping though. Debt ceiling will soon creep up again, as well as US midterm election; both tend to upset the market.

Sector wise, cyclical sectors like Industrial, Consumer Discretionary and Technology, plus Health Care because of Affordable Care are performing well. Avoid defensive sectors like Telecommunication, Utilities and Consumer Staples, plus interest rate sensitive Financials sectors.

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