Good news emanates from the Middle East this week. Although one can’t help thinking a ceasefire won’t have much longevity, let’s hope so. Oil prices fell on the news.
The US election result has led to many growth assets booming but the question is, are valuations becoming stretched as billions flow into US assets?
There are other opportunities but not many are immediately obvious, although the UK market for one is attracting attention. It is cheap on most metrics but with the Budget creating a drag on confidence, positive returns may not be immediately evident. However, on a relative basis, it could well be that the UK is more attractive than Europe due to its lower potential exposure to trade tariffs.
On our agenda this week:
- US valuations
- Will investors pull away from the US?
- The price of politics… Europe
- Are UK stocks set to outpace their European peers?
- Recent momentum
- Summary
US valuations
Companies in the S&P 500 have mostly beaten expectations for revenue and earnings. This has certainly supported markets in what was expected to be a period of turmoil. According to FactSet, 75% of companies in the index beat expectations on earnings per share – slightly below the five-year average of 77%.
Revenue-wise, 61% of companies beat expectations, against a 5-year average of 69%. To some extent, this reflects high expectations. The market is expensive on every measure. Investors want to see a lot to justify these valuations and will reward those who deliver while punishing those who don’t.
Continues…
Want to continue reading?
Our CEO, Gary Neild, writes engaging Market Commentaries every week. If you would like to receive the full version straight to your inbox every Friday, please join our communications list.
Risk warning
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.
