rosenberg @gs: what's priced in
--- divergence d'anticipation de croissance économique entre les différentes classes d'actif? quoi? le marché des actions n'est franchement pas d'accord avec celui du crédit, ni avec celui des matières premières? https://ems.gluskinsheff.net/Articles/Breakfast_with_Dave_101609.pdf ---
At a series of client meetings this week, we stressed that there were fewer and fewer securities left in the market that were priced inexpensively. Ain’t that the truth. We re-ran our regressions with the latest tightening in spreads and breakout in equity valuation and found that U.S. investment grade credit is now priced for 2.5% GDP growth in the coming year (was 2.0% two-months ago) and the S&P 500 is now de facto pricing in 4.8%, which, by the way, is now basis points shy of what it was discounting in the summer/fall of 2007. And, backing out the fair-value P/E from the corporate bond market, and yields have been backing up sizably in recent weeks, we can see that the S&P 500 is now pricing in $85 of operating earnings, which we think will be, at best, a 2013 story. Commodities are priced for 2.7% ‘global’ growth and are at least one ‘asset class’ that is priced for a muted recovery; though I would still classify corporate bonds as being within the zone of fair-value but at the expensive end of that zone currently. As an aside, the consensus is looking for +2.4% real GDP growth in the U.S.A. for next year, and +3.1% for global growth. Back to equities. Again, there was lots of excitement yesterday that initial jobless claims fell 10,000 in the October 10th week, to 514,000 — a nine-month low. Not that this isn’t good news — maybe payrolls will “only” be down 150,000 in the next go-around — but the stock market has basically moved at a rate that would ordinarily be consistent with a 350,000 print in jobless claims. In other words, the rally continues to move further away from the fundamentals.
