Saxo Bank (Saxo Bank)
Czech markets  |  March 22, 2013 15:52:40

The bubbles and the S & P at an historic high


Peter Garnry, Equity Strategist, Saxo Bank .

S & P 500 is just below the historic maximum. What is different compared to the year 2007?

American stock index S & P is trading only slightly lower, than the historical maximum 1565.15, created 9th October 2007. Each week, this maximum may be overcome. What is therefore different from today the end of 2007, when the index is at the same level?

In the table below we have outlined 24 factors and look at the differences between 2007 and 2013. We were most striking in the eye the fact that the evaluation of the S & P is lower in October 2007 compared to multiples of earnings and cash flow. (S & P 500 12-month forward P / E ratio and the S & P 500 Price-to-Cash Flow Ratio). This means that the actions now appear relatively cheaper. Financial pressure was then much higher and the situation regarding employment and growth in the number of building permits is currently better than in October 2007. On the other hand, it is now worse consumer sentiment and real household consumption grows more slowly. One of the biggest differences is the U.S. budget deficit, which rose from -1.1 to -6.3 per cent of nominal GDP.

sap 2007 2013 O bublinách a S&P na historickém maximu

Bursting bubble in equities?

Given that the S & P 500 close to new record highs, has launched a media fuss about stock bubble.However, the current trend in valuations and different macroeconomic variables hardly stand the claim that the shares are inflated bubble. I personally would say that any signs of bubbles are minimal at this point, but the likelihood of rising bubbles as they grow each month S & P 500th

Another important indicator that is often used to identify bubbles in U.S. stocks (non-financial companies), Tobin's q ratio. The index measures the relationship between market value and replacement cost the same physical assets. As the chart below shows, the current coefficient q is about 0.9, compared with a record $ 1.8 in the first quarter of 2000. Because of the information we have, it is clear that to bubble stocks have far.

tobinuv koeficient O bublinách a S&P na historickém maximu

Source: Dr. Eds Blog

The data described here in principle only support our view that U.S. stocks may rise further and our average forecast for 2013 is still 1640 points. It is necessary to take into account that the dispersion in forecasts for nine months is relatively high and therefore the S & P 500 can easily finish the year with values ??around 1550 or 1750th However, the current data would rather counted in 1640 than 1550 points. Financial markets are dynamic but their prognosis and we will over the course of 2013 to date.

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