Trade turbulence shows market vulnerability as U.S. stocks get pricier

  • 📰 globeandmail
  • ⏱ Reading Time:
  • 70 sec. here
  • 3 min. at publisher
  • 📊 Quality Score:
  • News: 31%
  • Publisher: 92%

Malaysia News News

Malaysia Malaysia Latest News,Malaysia Malaysia Headlines

Trade turbulence shows market vulnerability as U.S. stocks get pricier GlobeInvestor

Stock valuations have climbed to levels reached just before Wall Street’s late 2018 plunge, leaving the market at risk of shocks such as the sell-off this week as global trade tensions mounted.

“Whenever you get up to these levels, you just become more vulnerable,” said Matt Maley, equity strategist with Miller Tabak. “We know that valuations can stay high for extended periods of time, but it does make the market vulnerable to new negative developments and that is kind of what we are seeing this week.”

As of Thursday’s close, the S&P 500 was about 2.6 per cent below its all-time high close, which in turn reduced the forward P/E multiple on the S&P 500 to about 16.7 times, still well above the historic average of 15.1 times. On Friday, the S&P 500 fell modestly in early trading. The yield on the benchmark 10-year U.S. Treasury note sits at 2.45 per cent after eclipsing 3.2 per cent in November, making bonds look less competitive as an investment versus equities. Stocks are typically valued through by estimating their future cash flows, which are more valuable at lower rates.

Jonathan Golub, chief U.S. equity strategist at Credit Suisse, issued a report this week, titled “The Case for Much Higher Valuations”. It contended that by comparing prices to company cash flows, stocks are actually trading at a 20-per-cent discount to their historic averages. That imbalance leads some market watchers to say that any significant leg higher for stocks rests on the earnings picture improving, as opposed to valuations going even higher.

 

Thank you for your comment. Your comment will be published after being reviewed.
Please try again later.
We have summarized this news so that you can read it quickly. If you are interested in the news, you can read the full text here. Read more:

 /  🏆 5. in MY

Malaysia Malaysia Latest News, Malaysia Malaysia Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

Asia stocks mostly higher after Trump trade threatAsian stock markets rebounded Tuesday after Beijing said trade negotiators were preparing to go to Washington despite President Donald Trump's threat to escalate their tariff war.
Source: CTVNews - 🏆 1. / 99 Read more »