For the most part, we focus on the stock market in the United States and Israel. In Israel because we are, well, Israelis, or the so-called home bias. In the United States, because it is the largest and most important stock exchange in the world. However, as we know, there are opportunities in other places in the world. Among other things in the emerging markets, in Europe, Japan, and many other countries.
Along with the mini-rally on Wall Street in recent weeks, a similar rally has taken place in the global markets, which have risen by 11% since the lows of March. At the JP Morgan investment bank, they believe that this is not the end of the story and further increases are expected during the remaining months until the end of the year.
The analysts believe that the bad news will not stop. The purchasing managers’ indices will continue to fall, and the analysts will continue to lower forecasts, but they believe that the worse it gets, the better it will be, since the bad news will lead to a policy change on the part of the decision makers, which will have a positive effect on the markets.
The analysts, led by Mislav Matjeka from the bank’s London branch, also point out that the prices outside the United States are particularly attractive. The average earnings multiple outside the United States is only 12.6, 20% away from the long-term average. Below is a comparative table of the multipliers in the various regions around the world:
It can be seen that the pricing in Europe is low both objectively and in relation to the historical pricing of the stock markets in the region, while in the United States pricing is still above its historical levels, although it has come very close to that in recent months.
Another positive indicator is that the average dividend yield is still higher than the bond yield in many countries, including Japan, the Eurozone and the United Kingdom.
The analysts also point out that the Fed is close to peak inflation and from here on it will begin to soften. The dollar is also close to a peak and is expected to start falling after that. The balance sheets of the banks are very strong and they are expected to support businesses, the company reports will show only a slight retreat in their opinion. Consumption is high and backed by a high savings rate and a strong labor market. China is expected to present an ionic policy to support the markets – all of which, in their opinion, point to the prospect of continued increases in the markets.
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