QE HAS PRIMARILY DRIVEN VALUATIONS VIA PE EXPANSION SINCE 2012
Below are some key slides on Global Stock Market Valuations we at MATASII selected from SocGen's recent Global Strategy Presentation known as the "Woodstock for Bears."
Among the conference conclusions was that as a consequence of PE Expansion due to QE we are entering an era where VALUE will outperform.
QE has had a profound impact on Valuations due to PE Expansion. This will, and should be expected to change with the withdrawal of QE.
Valuations have come down since Peak QE, but as of yet Price has not fallen to the degree that should be expected.
PE = P/E = Since Peak QE and until recently earnings have continued to rise faster than rising prices. Now Prices are falling faster thereby further accelerating falling PE Valuations
Dividends and Earnings Growth are insufficient against the headwinds of falling valuations (PE's). This Bull Market has unusually been driven by valuations which is changing.
Extremely critical this time is that a Recession could make the fall in PE ratios even more catastrophic than usual....
.. and the usual it not a welcome hope for equity investors!
...especially with leverage at the levels it is now.
Hold on, its going to be a real ride unless Central Banks reverse direction soon. Even then it will only defer the inevitable which we outlined in our just released UnderTheLens video.