Valuations are the key for mid-term to long-term equities performance, i.e. relations between equities’ prices and fundamentals such as revenues and cash flows. The lower valuations the higher expected future equities return, and vice versa
Our global proprietary composite equity valuation indicator has reached the level of -26 % which indicates that at the moment global stock markets are at a very depressed level. Therefore, we think that a market bottom could be close and global stock markets could bounce back before long. We are of the view that pandemic COVID-19 negative impacts on global GDP dynamics, and revenues, earnings and cash flow of publicly quoted companies are already priced into the share prices. Moreover, the key central banks, Fed and ECB yesterday, have announced massive monetary stimulus. That is why we believe that investors should already start with a cool head to build or increase equity positions.
Michal Stupavský
Investment Strategist Conseq Investment Management, a.s.