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World markets  |  September 25, 2012 15:11:51

Graphs from the workshop Barclays Bode, that optimism will not last long on the stock exchanges

The discrepancy between the economic cycle and the appreciation of the U.S. stock market is still remarkable. The following three graphs illustrate how high hopes are now included in the prices of shares. Investors believe a successful earnings season, the recovery of the world economy, or that American politicians (perhaps as usual until the eleventh hour) to prevent fiscal cliff from which the U.S. economy is beginning fall 2013.

No good news on the horizon, a threat

Weak data confirm only anemic economic growth, monetary policy stimulates the economy of forces without much success and political uncertainty increases. The stock market is becoming more and more dependent on the central bank's helping hand. On top Add the still high price of oil, which is linked with expensive gasoline, food prices, inflation risks from the Fed's balance sheet for the U.S. dollar and rising commodity prices. The result is a decreasing consumption, and thus slowing growth.

The following graph compares the expected P / E (ratio of share price and earnings per share) and ISM new orders index. Are you still of the opinion that the current valuation is sustainable?

Expected P / E r. ISM new orders index

Frequently used way to assess the attractiveness of shares, the risk premium (equity risk premium - ERP), ie the difference between expected stock returns and government bond. The historical experience of a period of extreme financial repression in the U.S. after World War II that the decline ERP sustainable growth in the current P / E is not likely until the Fed starts to normalize its policy.

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When the calculations we include inflation and the ratio of stock to bond market volatility, we get a much less attractive figure valuations. Fed did not resort to normalize its monetary policy already at least three years, and so the next graph (real interest rate r. P / E) indicates that current valuation unsustainable.
Real interest rate r. expected P / E

What other charts from the workshop Barclays shows that the bulls will not have it easy at all
can be found on the web Investment

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Grafy z dílny Barclays věstí, že optimismus na burzách nepotrvá dlouho

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