JP MORGAN: RISK PREMIA FOR EQUITIES REMAINS FAVORABLE
29 June 2010 by Cullen Roche
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The wall of worry remains quite high according to JP Morgan. Risk premia remain abnormally high in today’s environment and could lay the foundation for further market gains according to their equity team:
“Sustained long-term uncertainty should keep risk premia well above the lows seen in past economic expansions. That is the easy conclusion. The issue is by how much. The composite risk premium on US assets (from its risk-return trade off line) remains near historic highs, despite the rally over the past year, and remains double its mean of the past half century (second chart). To us, uncertain as the aftermath of the financial crisis is, risk premia should not be double their historic mean.”
one of the big three ugly bailed out banks talks their book.