Expectations for a trade deal continue to run high. That and an unprecedented amount of monetary stimulus via over $300M in new money printed are what appears to be driving markets higher. US markets are up some 35 days straight ex Friday, while Asian markets continue to lag despite over a 30% valuation premium (price to earnings) the US market commands. The S&P 500 is at a 18X for price to earnings multiple vs historic norms of 15X based on Factset 2020 earnings. Going into 2020 we maintain our belief that domestic growth will accelerate marginally more so in 1H20 vs 2H20, but we wonder to what extent that has already been factored in. With the trade deal resolution likely to be drawn out over phases the key will be the lifting of tariffs more than anything else. That will be decided around mid month and will likely play a pivotal factor in growth expectations. Our model portfolios remain conservative focused on value vs growth and dividend paying stocks and weighted towards Asian given ongoing valuation disparities.
For more insights see our website and disclosures found there at BCA.
Comments