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US Equity Valuations: Difference between revisions
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* Jeffrey Gundlach (Sep 19 2023, 28:30): Difficult to have love for stocks when the ERP is at 17 year lows by a lot. The price action this year is mostly PE expansion, earnings haven't done much, and estimates for 2024 are high, markets not pricing for a recession, and he thinks the economy will not be as robust in 2024. He only likes long-term treasuries as short-term trade in anticipation of a recession, he thinks investment grade is not cheap due to spreads being low still, High-yield bonds you can find some opportunities but he is not interested, he likes mostly credit in the structured market due to better spreads.<ref>https://www.youtube.com/watch?v=nm-H8zzGKu4</ref> | * Jeffrey Gundlach (Sep 19 2023, 28:30): Difficult to have love for stocks when the ERP is at 17 year lows by a lot. The price action this year is mostly PE expansion, earnings haven't done much, and estimates for 2024 are high, markets not pricing for a recession, and he thinks the economy will not be as robust in 2024. He only likes long-term treasuries as short-term trade in anticipation of a recession, he thinks investment grade is not cheap due to spreads being low still, High-yield bonds you can find some opportunities but he is not interested, he likes mostly credit in the structured market due to better spreads.<ref>https://www.youtube.com/watch?v=nm-H8zzGKu4</ref> | ||
* Bill Gross, Pimco co-founder (Oct 4 2023): Equity investors would need to justify entering the market without a risk premium by relying on potential increases in productivity and a stronger economy, he is not in this camp, and thinks PE ratios are coming down to increase the equity risk premium. He thinks inflation will settle higher than 2%, and 5% on 10 year treasury is still not great value due to the fiscal issues. <ref>https://www.youtube.com/watch?v=xAhvxjmqIfc&t=23s</ref> | * Bill Gross, Pimco co-founder (Oct 4 2023): Equity investors would need to justify entering the market without a risk premium by relying on potential increases in productivity and a stronger economy, he is not in this camp, and thinks PE ratios are coming down to increase the equity risk premium. He thinks inflation will settle higher than 2%, and 5% on 10 year treasury is still not great value due to the fiscal issues. <ref>https://www.youtube.com/watch?v=xAhvxjmqIfc&t=23s</ref> | ||
* Jeremy Grantham (October 5 2023): | * Jeremy Grantham (October 5 2023): We are currently in the deflating part of the bubble from 2021, we will enter a deeply recession in the near term, an we are entering a new era of higher yields. Yields at current levels, it would be mathematically reasonable to think the US market as whole could fall by 50%, he contends. There’s trouble ahead if the “magnificent seven,” the few companies that have been carrying the index this year, lose any part of their magic.<ref>https://www.bloomberg.com/news/articles/2023-10-06/podcast-gmo-s-jeremy-grantham-says-no-one-should-invest-in-the-us</ref><ref>https://www.youtube.com/watch?v=-GlQk_FfD3Q</ref> | ||
* Larry Fink, BlackRock chairman and CEO (Oct 13, 2023, 4:00): Pension fund, and corporate funds will start selling more equities and buying more bonds. Not happening yet, but will happen. There are opportunities to earn 7-15% on credit, with a high probability of success, that's where a lot of money is moving. <ref>https://www.youtube.com/watch?v=HM-ILBFSviw</ref> | * Larry Fink, BlackRock chairman and CEO (Oct 13, 2023, 4:00): Pension fund, and corporate funds will start selling more equities and buying more bonds. Not happening yet, but will happen. There are opportunities to earn 7-15% on credit, with a high probability of success, that's where a lot of money is moving. <ref>https://www.youtube.com/watch?v=HM-ILBFSviw</ref> | ||
* John Hussman (Oct 17 2023): Market valuations stand at one of the three great bubble extremes in US history, rivaling the peaks of 1929 and 2000. Those two previous periods of reckless speculation ended disastrously, and the current bubble is likely to unwind in similar fashion. That's not a forecast, but it certainly is a historically-consistent estimate of the potential downside risk created by more than a decade of Fed-induced yield-seeking speculation. Hussman noted the S&P 500 is priced today for a negative return over the next 10 to 12 years. The gap in expected returns between stocks and bonds is now among "the worst levels in history," and the gauge's total return is poised to lag Treasury bond returns by about 6.5% a year for the next decade. <ref>https://finance.yahoo.com/news/p-500-historic-bubble-could-192029487.html</ref><ref>https://twitter.com/hussmanjp/status/1714669132648444402/photo/1</ref> | * John Hussman (Oct 17 2023): Market valuations stand at one of the three great bubble extremes in US history, rivaling the peaks of 1929 and 2000. Those two previous periods of reckless speculation ended disastrously, and the current bubble is likely to unwind in similar fashion. That's not a forecast, but it certainly is a historically-consistent estimate of the potential downside risk created by more than a decade of Fed-induced yield-seeking speculation. Hussman noted the S&P 500 is priced today for a negative return over the next 10 to 12 years. The gap in expected returns between stocks and bonds is now among "the worst levels in history," and the gauge's total return is poised to lag Treasury bond returns by about 6.5% a year for the next decade. <ref>https://finance.yahoo.com/news/p-500-historic-bubble-could-192029487.html</ref><ref>https://twitter.com/hussmanjp/status/1714669132648444402/photo/1</ref> | ||