Global Markets

DM Valuations Monitor

DM Valuations Monitor

High valuations may hold back risky assets

While we don’t think that risky assets are in a systemic bubble, we suspect there is limited scope for further large increases in valuations to drive their prices higher over the next few years.

9 July 2021

DM Valuations Monitor

Limited scope for valuations to push risky assets higher

In our view, changes to the economic and policy outlook since the pandemic mean that corporate credit spreads in the US may remain lower than in their recent past for some time. Nonetheless, we see limited scope for them to fall much further from here. This, coupled with our view that US long-dated TIPS yields will rise gradually over the next couple of years, suggests to us that further gains in US equities will be relatively small, and increasingly driven by expectations for strong earnings rather than higher valuations.

15 April 2021

DM Valuations Monitor

Little evidence of widespread overvaluation in risky assets

Despite signs of exuberance in a few markets, we don’t think that we are in the late stages of a bubble in “risky” assets generally. Provided vaccines enable the gradual relaxation of coronavirus restrictions around the world, we continue to forecast that the prices of most risky assets will rise further.

14 January 2021
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DM Valuations Monitor

Risky assets are not significantly overvalued in our view

While the S&P 500 is now above its pre-pandemic level, and US investment-grade corporate bond yields are even lower, we do not think that the valuations of “risky” assets in the US or elsewhere are unsustainably high. In fact, we expect equities and corporate bonds to rally further and many developed market (DM) currencies to make further ground against the US dollar between now and end-2021.

13 October 2020

DM Valuations Monitor

Valuations unlikely to halt recovery in risky assets

Despite talk of a bubble in “risky” assets, we do not think that their valuations are particularly stretched and will prevent them from gaining further ground over coming months.

10 July 2020

DM Valuations Monitor

MSCI USA’s valuation most stretched since dot-com era

The price/estimated earnings (P/E) ratio of the MSCI USA Index – a benchmark index of mid- and large-cap US equities – recently rose to its highest level since the dot-com era. Nonetheless, we still expect the index to recover a bit more ground this year, after slumping amid the outbreak of coronavirus.

22 April 2020

DM Valuations Monitor

US dollar’s valuation won’t prevent it from rebounding

While the dollar looks overvalued on most metrics, and has risen significantly over recent years, we don’t think that it is very overvalued. In our view, its valuation will not stop it from strengthening a bit further over the next couple of years.

17 January 2020

DM Valuations Monitor

Valuations of US equities likely to fall back

We don’t expect the valuations of US equities to continue to rise over the rest of 2019. In fact, we expect the price/earnings (P/E) ratio of the S&P 500 to fall, and this is a key reason why we forecast that the index will drop by about 15% from its level now by the end of the year.

3 October 2019
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