Today's US$72 trillion question for investors: To buy or not to buy into the global equities rally? Notwithstanding inflated share prices, ...
Today's US$72 trillion question for investors: To buy or not to buy into the global equities rally? Notwithstanding inflated share prices, politics and the pandemic, the answer from many is a resounding"yes."
So while renewed coronavirus outbreaks and looming U.S. elections have made some investors cautious, many equity bulls are hanging in there, having already boosted the value of stocks globally by US$24 trillion since end-March. Stocks are benefiting of course from above-average equity-risk premiums, the return one can earn by holding stocks compared with risk-free assets. Global stocks carry an ERP of 4.6per cent, while for U.S. stocks, it's at 4per cent.As for valuations, they are hovering near 22 times forward earnings for the U.S. S&P 500 index, the highest since the dotcom bubble in early 2000. But then, the index too has changed dramatically with technology by far its biggest sector component.
A ratio of U.S. stocks on a market weighted basis to an equally weighted index of shares is at its highest levels since the 2008 crisis, indicating the dominance of the handful of large tech stocks in the market.
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