Saturday, January 10, 2015

US Stock Valuations

This is an absolutely fantastic piece by James Paulsen from Wells Capital. I'd recommend this to anyone that has exposure in US equities.

Summary:
1) US stocks are expensive
2) ALL US stocks are expensive
3) ALL US stocks just recently surged to become expensive
4) ALL US stocks just recently surged to become expensive making relative comparisons less useful
5) How does a stock market react to ZIRP normalising? No one knows
6) Since 1950, current valuations have always produced a correction
7) Indices are safer than individual stocks
8) Diversify overseas to get away from the overvalued US stocks

Conclusion: At the very least, avoid US stocks. If you have the guts, opportunities to profit on the downside might present themselves very soon.

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