Within the asset allocation of our investment portfolios we have US equities strongly underweighted against benchmarks.
Source: Bloomberg
This investment decision stems from the fact that we consider US equities, according to S&P 500 index, as tremendously overvalued. According to the widely followed valuation indicator P/S (price-to-sales ratio) US equities are overvalued by almost 50 % at the moment. Long-term average of P/S ratio is 1.6x while the current value is 2.4x. Therefore we can currently buy US equities for 2.4 times annual revenues. We do not think that US equities are going to plummet. We rather expect that they will significantly lag the performance of the rest of the world in 2020, especially emerging markets equities which lagged US equities performance significantly in the last several years.
Michal Stupavský
investment strategist of CONSEQ