Is the stock market level fundamentally justified?
February 2nd, 2021
1 minute read
High
The stock markets have gone up super fast since March 2020, making a full recovery back to the levels of early last year, before the crash. Now suddenly in January we’ve had a wobble & stocks plunged again at the end of the month of January. So the question is, are stock market levels too high or justified by fundamentals?
Economy
So far the best data we have is on the US markets where fourth quarter data is already out for both GDP & companies’ earnings. If we look at the five years since 2016, then up fo 2020 it’s the economy which performed best. Stocks led up to 2018, then GDP took the lead to the fourth quarter of 2019.
Stocks
But when everything came to a halt in 2020, it was the economy which did worst on a quarterly basis. Although the stock market fell fast at first, stocks sensed an opportunity & started to recover before the first quarter was even over. The stock market bet on a full recovery was eventually proven 100% correct as GDP has recovered.
Sales
We have 2020 sales of 9 US stocks, representing about 5% of GDP. The sales were, slightly less great than the stock market up to 2018 & also slowed up to the end of 2019. In 2020 sales dropped more than stocks but less than GDP. But by the fourth quarter it’s company sales which are now in the lead.
Yes
The US economy has recovered, sales & the stock market have now more than recovered. We are back in a sales led growth period again. Stocks are not providing huge value, but they do still look slightly undervalued at the current levels with more growth ahead. Indonesia should look similar when we get the data in the next few weeks.
1 minute read
High
The stock markets have gone up super fast since March 2020, making a full recovery back to the levels of early last year, before the crash. Now suddenly in January we’ve had a wobble & stocks plunged again at the end of the month of January. So the question is, are stock market levels too high or justified by fundamentals?
Economy
So far the best data we have is on the US markets where fourth quarter data is already out for both GDP & companies’ earnings. If we look at the five years since 2016, then up fo 2020 it’s the economy which performed best. Stocks led up to 2018, then GDP took the lead to the fourth quarter of 2019.
Stocks
But when everything came to a halt in 2020, it was the economy which did worst on a quarterly basis. Although the stock market fell fast at first, stocks sensed an opportunity & started to recover before the first quarter was even over. The stock market bet on a full recovery was eventually proven 100% correct as GDP has recovered.
Sales
We have 2020 sales of 9 US stocks, representing about 5% of GDP. The sales were, slightly less great than the stock market up to 2018 & also slowed up to the end of 2019. In 2020 sales dropped more than stocks but less than GDP. But by the fourth quarter it’s company sales which are now in the lead.
Yes
The US economy has recovered, sales & the stock market have now more than recovered. We are back in a sales led growth period again. Stocks are not providing huge value, but they do still look slightly undervalued at the current levels with more growth ahead. Indonesia should look similar when we get the data in the next few weeks.
