Friday, August 05, 2016

Recession Indicators & Capital Risks 
Amid Ongoing Financial Crisis
Danielle Park highlights the challenges with the U.S. economy .. "The peak of economic expansion is now well behind us for this cycle with the rate of growth slowing since 2014. At the same time, markets entered this downturn at some of the highest asset valuations in history. This is a toxic combination for invested capital. The above chart courtesy of Doug Short, reminds of stock market outcomes (market price declines) that have followed GDP downturns since 1929. Each time that equity valuations have entered the downturn more than 20% above their mean, market prices have returned -36 to -89% from peak to trough. Today 76% above the mean, equity valuations are worse than the peak of 1929 and second only to the all time fleeting 2001 tech top. Sober days lie ahead for those unaware, or in denial."
LINK HERE to the commentary

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