David Rosenberg asks the all important question – are there drivers that can sustain further gains in equities after a huge advance. Via this morning’s note:
“Is there a bull case for equities?
Well, after a 20% pop off last October’s lows, that would seem like a pretty strange question to ask.
But what is most important is not looking through the rear-view mirror, but driving ahead by focusing on what is happening through the front window. With that in mind, we now need to build some assumptions to get to the bull case…
If…
This housing recovery story in the US has more legs than just balmy seasonal December weather, and
If…
China manages to navigate its economy to a soft landing instead of a hard landing, and
If…
Europe can hang in…
Then…
One can build the assumption that, if all goes well, the forward PE multiple reverts to 15X, where it was before the trap door opened up last spring…”
Source: Gluskin Sheff
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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