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1.Market Observations, 8.Was Sticky

28 July 2017 (AFR) – Platinum Asset’s Kerr Neilson shines light on disconnect between economy, shares – Perfect conditions may prove to be mirage for shares

(28 July 2017, AFR, p30, by Philip Baker)

‘Amid all the excitement about how the US Federal Reserve can’t really hike interest rates again, about the Dow Jones and S&P 500 hitting record highs – again – about global economic growth tipped to get better, about inflation and about good news on the earnings front both here and in the US, it’s fair to ask: Can it get any better than this? – Call it a sweet spot.’ <snipped…>

‘Well, before investors get too excited about the so-called perfect conditions prevailing, it may be an idea to read the latest quarterly report from Platinum Asset’s Kerr Neilson. In a timely reminder, Neilson writes about how “impressions are often very different from the underlying facts” and cites as an example the disconnect between the economy, profits and the performance of a sharemarket.’ <snipped…>

‘In no real order, the company studied profits, price-to-earnings ratios, GDP and earnings growth, past returns, dividend yields, interest rates on 10-year Treasury bonds and government debt as a percentage of GDP. It turns out  that none of these factors came even close to forecasting what will happen to the sharemarket in a year’s time. Even over a longer time frame, the study showed it was really only price-earnings ratios that could tell investors something meaningful about what was going to happen.’

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About robertbrain

Brainy's Share Market Toolbox. Read the honest truth about the sharemarket. Develop or fine tune your investing/trading strategies using share price charts (technical analysis), or learn about the investment strategies of others. Melbourne (Australia) based - supporting share market investors and traders to build wealth through smarter investing using my Share Market Toolbox arsenal of weapons to tackle the market.


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