A couple of very good reports, imo.
UBS called the end of the cyclical bull market last week calling (SP500) 1370 or thereabouts as the near term likely top, probably in August 2011 but there house longer term view is for a secular bull market in equity given ‘undervaluation’ at current levels.
This report is a bit of a chart blitz. It needs more words to explain their points especially as regards to monetary drivers of prices. They hint at this as the gdp growth nos are not high whereas earnings growth is projected to be strong. Of course earnings growth are nominally stated not relatively stated. Ie they are not inflation adjusted. If you expect high inflation and low adjusted gdp growth then this explains high, inflation unadjusted, earnings growth. I agree with this perspective though do not expect much of an inflation adjusted return in the two sectors of the three sectors they pinpoint, namely, tech, industrial cos and consumer staples. These sectors will hedge some of the inflation for sure and will, almost certainly, be far better than cash and fixed income, imo. (UBS doesn’t mention commodities which is somewhat odd?)
Here the GS house view on relative GDP growth projections for the decade. (Imo commodities but also consumer staples in these ‘EM’ economies is the way to play this).
Next up, Jim O’Neill’s current mid July view of the world. He asks a couple of excellent questions inc:
Why do people persist in calling these fiscally sound drivers of world growth “emerging markets?”
Why do we all derive the risk-free rate from the G7 world’s bond markets?
Here Jim’s entire comments:Goldman-Sachs-JON
Hahaha, i do believe Jim raises some excellent questions indeed. He hits a few nails on the head here.
All the best Rich
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