What's the value of valuation?
Main U.S. indexes all red
Tech down most among S&P sectors; energy leads gainers
Euro STOXX 600 index ended up ~0.35%
Dollar up; crude rallies ~1.9%; gold, bitcoin both off >1
U.S. 10-Year Treasury yield rises to ~3.86%
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
WHAT'S THE VALUE OF VALUATION?
While investors have long used "valuations" to make decisions about where to invest their money, retired strategist Jim Paulsen has been thinking about how the usefulness of such measures has changed over the years.
With the goal of evaluating the "state of cheapness or expensiveness" of a stock or an index, valuation tools include measures like trailing price-to-earnings per share ratios (P/E) or forward P/E.
But Paulsen, an economist and seasoned Wall Street watcher who most recently worked as chief investment strategist at Leuthold Group, writes in his blog that "these comforting investment tools began blowing up in the 1990s."
The reason is that valuations rose dramatically higher than the upper limits of the traditional ranges that used to make sense to investors. In the late 1990s, this applied particularly to technology stocks, which were, of course, heading for the bursting of what became known as the dot-com bubble.
Whether valuation measures make sense, Paulsen boils it down to this:
"All investors at their root – regardless of whether they are primarily oriented towards value, growth, momentum, technical, quantitative, or sector/style rotations -- are value investors. Nobody wants to buy high and sell low."
So he asks, what should they do now? Should investors leave valuation tools by the wayside, still try to adhere to old rules or try to develop "new valuation ranges" based on how the market has traded since the 1990s?
Paulsen says, "None of these are great alternatives." Valuations have been mostly above the 'old' range for roughly 35 years - almost as long as his ~40 year stint working in markets.
But new valuation ranges are also problematic as they have "far less efficacy in accurately assessing stock market valuation risks." However, Paulsen sees ignoring valuation completely as the "riskiest approach of all."
While there isn't an obvious great replacement for the pre-90's model, his suggestion is this. Pay attention to valuation but maybe a bit less religiously.
For example, "If valuations are relatively high but monetary accommodation is evident, yields are declining, disinflation is prominent, and real GDP growth is healthy, aggressive equity position weightings could remain higher than they would have been in earlier decades."
And on the flipside, even if valuations look attractive, "If yields have been rising, private sector confidence is high, balance sheets have been extended, or if market momentum has slowed," then it might be time to reduce equity risk position weightings.
The retiree, who can't quite close the door on Wall Street, publishes his blog "for fun" at paulsenperspectives.substack.com.
(Sinéad Carew)
*****
FOR THURSDAY'S EARLIER LIVE MARKETS POSTS:
JOBLESS CLAIMS, FLASH PMI, HOME SALES: MAKING THE RATE CUT CASE - CLICK HERE
U.S. STOCKS CHURN AROUND INTO JACKSON HOLE - CLICK HERE
DOW INDUSTRIALS: AMID RECENT SWINGS, TRADERS TURN TO CHARTS - CLICK HERE
THE CASE FOR MORE BALANCE BETWEEN EXPENSIVE TECH AND DEFENSIVES - CLICK HERE
FROM NATWEST TO BAE: ACTIVE FUNDS ADDING UK EXPOSURE - CLICK HERE
DOLLAR BULLS - CLICK HERE
RETAILERS LIFT STOXX, MINERS DRAG - CLICK HERE
TEPID START IN STORE FOR EUROPE - CLICK HERE
IT'S BEGINNING TO LOOK A LOT LIKE RATE CUTS - CLICK HERE
Initial claims and JOLTS firings https://reut.rs/46VCBXI
Continuing jobless claims and JOLTS hires https://reut.rs/4cAKvXt
Flash PMI https://reut.rs/3XfhUmc
Existing home sales https://reut.rs/3YWoJKS
الأصول ذات الصلة
آخر الأخبار
إخلاء المسؤولية: تتيح كيانات XM Group خدمة تنفيذية فقط والدخول إلى منصة تداولنا عبر الإنترنت، مما يسمح للشخص بمشاهدة و/أو استخدام المحتوى المتاح على موقع الويب أو عن طريقه، وهذا المحتوى لا يراد به التغيير أو التوسع عن ذلك. يخضع هذا الدخول والاستخدام دائماً لما يلي: (1) الشروط والأحكام؛ (2) تحذيرات المخاطر؛ (3) إخلاء المسؤولية الكامل. لذلك يُقدم هذا المحتوى على أنه ليس أكثر من معلومات عامة. تحديداً، يرجى الانتباه إلى أن المحتوى المتاح على منصة تداولنا عبر الإنترنت ليس طلباً أو عرضاً لدخول أي معاملات في الأسواق المالية. التداول في أي سوق مالي به مخاطرة عالية برأس مالك.
جميع المواد المنشورة على منصة تداولنا مخصصة للأغراض التعليمية/المعلوماتية فقط ولا تحتوي - ولا ينبغي اعتبار أنها تحتوي - على نصائح أو توصيات مالية أو ضريبية أو تجارية، أو سجلاً لأسعار تداولنا، أو عرضاً أو طلباً لأي معاملة في أي صكوك مالية أو عروض ترويجية مالية لا داعي لها.
أي محتوى تابع للغير بالإضافة إلى المحتوى الذي أعدته XM، مثل الآراء، والأخبار، والأبحاث، والتحليلات والأسعار وغيرها من المعلومات أو روابط مواقع تابعة للغير وواردة في هذا الموقع تُقدم لك "كما هي"، كتعليق عام على السوق ولا تعتبر نصيحة استثمارية. يجب ألا يُفسر أي محتوى على أنه بحث استثماري، وأن تلاحظ وتقبل أن المحتوى غير مُعدٍ وفقاً للمتطلبات القانونية المصممة لتعزيز استقلالية البحث الاستثماري، وبالتالي، فهو بمثابة تواصل تسويقي بموجب القوانين واللوائح ذات الصلة. فضلاً تأكد من أنك قد قرأت وفهمت الإخطار بالبحوث الاستثمارية غير المستقلة والتحذير من مخاطر المعلومات السابقة، والذي يمكنك الاطلاع عليه هنا.
