October 26, 2015

1 year stock market risk vs reward unattractive

After six years of the Federal Reserve's Quantitative Easing and Zero Interest Rate Policy, the global economy is still in a condition that precludes a meager 25-basis-point rise to the fed funds rates. What does it say about the foundation of future U.S. economic growth when a zero-bound rate setting is failing to generate self-sustaining growth and escape velocity?

.... you might conclude that:

-    The outlook for our global equity markets is "FUBAR"
-    The consensus estimates for worldwide economic growth and profits are inflated
-    Valuations and market levels are overpriced

The markets, to quote my Grandma Koufax, are "in a (sour) pickle from Katz's Delicatessen on Houston Street" as the chasm between asset prices and the real economy grows ever wider.

The global economy and the markets have never faced such a wide array of possible outcomes, many of which are adverse. Yet market participants seem afflicted with a loss of memory and the belief that only positive outcomes stand to survive.

My Malthusian view seems justified based on the ever-weakening and wobbly global economic outlook and markets' still-elevated valuations. And I see an unattractive risk-vs.-reward quotient in the U.S. stock market over the next 12 months.

via http://www.thestreet.com/story/13332868/2/it-s-back-to-the-future-day-and-wall-street-is-still-overpriced.html