The S&P has reached a record high level. Some has tried to compare this peak to the 2000 and 2007 stock market tops. However, some like Broker Josh Brown remind investors that the comparison stops with a nominal price. Stocks are much reasonably priced than they were before the 2 crashes of the markets.
Market guru Ed Yardeni said that he is troubled to see that for the past 9 weeks the forward earnings have been stuck around 115 dollars and he thinks this is the right measure of earnings to drive the market. This growth stagnation, however, has caused havoc and has made valuations less attractive.
Famous Felix Zulauf makes a comparison between the stock and gold market. In his opinion, the problem lies in the absence of improvement, not in the rising prices. He says that prices are mainly driven by the lack of investment opportunities and the assumption that central banks’ printing will generate investment returns for the equity investors. He thinks that the leaders of the equity market (Germany, Switzerland, Japan and the U.S) are much powerful and are able to carry on with a buying climax. Zulauf compares stocks with gold, giving spring 2011 as an example – the situation in which gold was though to go only in one direction due to inflation. He says that such is the case with stocks now.
According to Felix, when equity markets realize that “the emperor has no clothes”, they will certainly face a painful adjustment to bring the markets intact. For the gold markets it was when investors discovered that there was no rise in CPI inflation. Zulauf says it’s true that equities look more attractive than fixed-income alternatives. Investors act accordingly don’t expect a recession since they believe that equities are the best haven. He says this is the reason why investors may see an end of the buying climax and not a conventional broadening cycle.
In other words, gold caused bigger fears of rampant inflation. In comparison, stocks are currently in a similar position as investors expect that the improving economy will transform everything into earnings growth.
With the influence of inflation, the world witnessed gold market’s meltdown in 2013.
Felix Zulauf offeredhis take on debt, gold, bonds, austerity and Japan. Moreover, he provides a perspective on currencies.