Around the World (ATW) this week is back to a familiar refrain -overpriced global equity markets. Attached is an article from this weeks' Globe & Mail quoting fund manager Bill Gross. Gross manages the Janus Global Unconstrained Bond Fund, and reiterates many of the comments I've made in previous (ATW) blogs. These include:
- stocks are priced at unrealistic levels based on the outlook for global economic growth
- asset prices are unlikely to repeat returns of the past 6 years based on earnings
- high rates of growth and the productivity that drives it are unlikely to continue
- valuations (Price/Earnings) are at 20 - about 30% higher than historic norms
Demographics are unfavourable across the developed world and in China too, where older consumers buy less and spend less. Further there is concern that productivity gains have been really about workers working longer with no increase in pay, enabled through computers, tablets and smart phones which enables us to complete work from anywhere at no cost to employers. Finally technology, seen as the magic bullet, is everywhere expect in productivity gains.
Bottom line, this current Bull Market looks pricy and we fully expect a correction at some point in the next 18th months. The good news? Our portfolios are defensively positioned and should weather any downturn with lower volatility and downside. So we're not too worried when Bill Gross turns out to be right.