Why we remain bears

Why we remain bears

30 Jun 2020
Andrea Cicione
Head of Strategy and COO Research
Charles Dumas
Chief Economist

Charles and Andrea discuss our core house view; that we remain convinced bears, S&P 500 down at least 20% from here is our starting point. Quarterly earnings & other triggers to send the equity market down in waves, these downward lurches could take more than a year to roll through. The current self-confidence driving stock prices higher merits the comparison of current forward p/e ratios to their only precedent, the 1999-2000 tech bubble, a comparison with the 2½-3-year bear market that slumped in 2000 and finally ended in early 2003 thus also merits comparison to now. Equities offer no margin of safety owing to these high p/e and EPS expectations. This makes them unappealing from a risk-reward perspective. We keep a cautious stance on equities owing to the lack of apparent value at current prices, but a sudden drop to retest this cycle’s lows is unlikely in the near term.

   
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