Læs hele analysen fra Natexis her
Why there is reason to be optimistic about equities Author: Patrick Artus We look at the situations of the United States and the euro zone. The weakening of potential growth is making some investors pessimistic about the outlook for share prices.
But we are, on the contrary, optimistic about the outlook for equity markets:
– What matters is the relative position of long-term interest rates and nominal growth; we believe central banks want to keep interest rates lower than growth to continue to facilitate deleveraging. This ought to drive up equity valuation (PERs);
– Moreover, developments in labour markets consist in a weakening of wage earners’ bargaining power, and therefore a distortion of income distribution in favour of profits, which is also driven by the fall in commodity prices.
This means that as a trend, profit growth is outpacing nominal GDP growth, which is increasing the equilibrium equity valuation.
