US Stocks: Proceed with Caution

If you aren’t considering holding an underweight position to United States equities now, what catalyst would be required before you did decide to reduce your exposure?

Dan Kemp 26 August, 2016 | 12:05PM
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As we see the equities world currently, the economic progress of over the past seven years has caused a significant and unsustainable deviation in valuations. This is no clearer than in the United States. To put this in perspective, since the crisis the total size of the United States economy increase 28.6% while the stock-market has grown 196.5%. This would seem to be an unrepeatable occurrence from current levels.

Markets are addicted to this drug we continue to call ‘stimulus’

Of course, the rear-vision mirror is always clearer than the road in front, and there are multiple reasons validating such a strong result; including initially weak valuations, strong earnings growth relative to the economy, sustained low interest rates, Federal Reserve intervention, falling unemployment and strong profit margins.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Dan Kemp

Dan Kemp  is Chief Investment Officer, Morningstar Investment Management EMEA