Monday, August 22, 2016

Irrational Exuberance Is Back...
And Even The Federal Reserve Is Worried
"The bullish argument has it, the inflection point in U.S. earnings has been reached, a bear market has been averted, emerging markets are taking up some of the strain again and brokers have been slow to catch up with reality. Against this, estimates for the current third quarter are actually still falling, and including energy, the brokers still call for a slight fall of 0.4%. Earnings in the second quarter were better than expected, but they always are; they beat expectations by less than has been usual in recent years. If this is an inflection, the turn it signals is not at an acute angle ..Add to this that US retail sales data suggest a sluggish economy, meaning that there is little reason to expect a big rise in revenues; that margins will be hard to expand; and that core inflation and earnings data suggest at least a whiff of inflation and a risk of higher rates from the Fed .. Put all these together, and the highest prospective earnings multiples since the dotcom boom look like irrational exuberance."
- John Authers, FT
LINK HERE to the essay
LINK HERE to the alternative source

No comments: