Goldman Sachs Analyst: Valuations Are Reaching Highs

25.07.2017 • Switzerland

Henry Bonner – Strategy and Council Letter (Switzerland) –

You are already more than 3,000 giving your support to our petition against the rise of the CSG …

As a reminder, in the “action plan” of Macron, you have an increase in contributions that the state applies to pensions …

After raising from year to year, the State intends to push even further … passing the CSG at 8.1% (against 6.6% today) as of January 1, 2018 …

In short, we launched a petition to counter this increase … to say STOP to the administration before they further increase the contributions on retirement …

You will find the petition here if you have not yet put your name (or shared on your Facebook) …

This Week, the Stock Market moves …

We’re getting 3 weeks since the end of the quarter … and the companies are preparing to publish results …

On Wall Street, 180 companies in the S & P 500 index will publish results … including the “giants” of computers like Alphabet (parent company of Google), Facebook, and others.

In short, the coming week is going to make the eddies …

Wall Street has been rising since January … even after the “shortness of breath” of the wave of optimism that Trump has brought to markets …

In 6 months, the S & P 500 index rose by almost 9% …

Here in France, the equivalent of the S & P 500, the CAC 40, climbed at the beginning of the year but is down since early May …

That said, its performance since February is in line with Wall Street, rising by just over 8% since …

As you can see, the Paris Bourse follows Wall Street more or less … and the latter is optimistic about the rise of computer groups – Alphabet, Facebook, and Apple in particular …

For the companies of the S & P 500 that have already published their results, 77% have broken the expectations of analysts … which encouraged the markets … pushing the Nasdaq to reach a record level …

On the other hand, Wall Street begins to think that “something is wrong …”

In short, valuations are climbing too much … and now groups like Goldman Sachs and JP Morgan begin to wonder if the future can justify the rise of values ​​…

In a post released yesterday, Goldman Sachs announced that “valuations are reaching highs,” which could suggest a downturn in the coming weeks …

According to their chief analyst, David Kostin, “the ratio of valuations to business revenues on the S & P 500 has increased by 80% since 2011 (to 18 times), which exceeds the values ​​of this Ratio 89% of the time in 40 years. ”

Here is the FactSet graph on the ratio of income valuations …

As you can see, we are approaching a level we have not experienced since 2008 …

What to do…?

Will the market begin to plunge …?

Well, we’ve received results for the moment up on the S & P 500 …

We have doubts on the side of Alphabet … where analysts report that rising profits slows down …

We have suggested to have a little gold … and maybe Bitcoin (although the value of this currency will fluctuate – and possibly fall) day by day …

Of course, the market can continue to publish results rising … but the market can not climb to “forever …”

At today’s prices, we must see profits climbing from month to month to justify them …

If we see these profits missing the call … then the downhill slope could prove stiff …

Truly,

Henri Bonner

-Read more at www.lettre-strategie-conseil.com (French)-

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