IS THE CULT OF the equity over? London-based Chris Tracey, global equity strategist at JPMorgan Fleming Asset Management, doesn't think so.
'There is a great feeling of despair from the individual,' he said. 'This is a function of a long bear market, once everyone has given up it is precisely the time you get the valuations . . . the opposite view starts to work.'
In fact, Mr Tracey cautiously makes a case that the United States market may have bottomed late last year, with the S&P 500 hitting a low of 776.45 points on September 10. Average projected US earnings for this year are at US$52 per share from US$48 last year.
'We have to remember that the economy is recovering, although extremely slowly, and, secondly, corporate profits bottomed out in the second quarter last year in America and are recovering,' he said. 'The problem is there is a cap on the upside. Why should the US market be revalued back to where it was?'
Mr Tracey expects that low nominal growth will keep a lid on corporate profits, trapping stocks in a valuation range of between 14.5 times earnings and 20 times on the upside for 'years to come'.
'The moral may well be that on days when markets are extraordinarily weak for whatever reason, that is a good level at which to buy equities. It gives you a chance to make a decision once you have made 20 per cent to get out again. This is a trading market that could last for yonks unless something on the economic front breaks,' he said.