26 Jun 2014
A global look at equity valuations - Goldman Sachs
FXStreet (Łódź) - The Goldman Sachs team of analysts observe that year-to-date, the S&P 500 is up 6%, joining most other global equity markets in positive territory for the year.
Key quotes
"Going back to the start of 2013, global equity markets have made significant gains, led by DM markets. Returns over this period have been driven, in large part and in most places, by changes in P/E."
"Against this backdrop of significant stock price appreciation, one source of skepticism that we often encounter is that equity market valuations are increasingly a constraint."
"Looking at trailing P/E multiples over long histories, valuations do look elevated. But assessing macro linkages is probably a better way to assess how reasonable current multiples are."
"The macro backdrop in most major DM markets suggests that multiples are not a constraint to further index-level price appreciation, with growth expected to pick up, inflation moderate and yields at all-time lows in many places."
"However, multiples at current levels do suggest that forward returns may be more muted than in the recent past, as the wringing out of equity risk premia in the wake of the GFC has progressed."
Key quotes
"Going back to the start of 2013, global equity markets have made significant gains, led by DM markets. Returns over this period have been driven, in large part and in most places, by changes in P/E."
"Against this backdrop of significant stock price appreciation, one source of skepticism that we often encounter is that equity market valuations are increasingly a constraint."
"Looking at trailing P/E multiples over long histories, valuations do look elevated. But assessing macro linkages is probably a better way to assess how reasonable current multiples are."
"The macro backdrop in most major DM markets suggests that multiples are not a constraint to further index-level price appreciation, with growth expected to pick up, inflation moderate and yields at all-time lows in many places."
"However, multiples at current levels do suggest that forward returns may be more muted than in the recent past, as the wringing out of equity risk premia in the wake of the GFC has progressed."