Top Gun moment
Nov 29, 2022
At ECP, we believe company valuations work similarly to gravity in physics. Stock markets may well have a ‘Top Gun moment’ by defying gravity with high valuations for a while but will ultimately be dragged down to earth. Low valuations will also ultimately revert to the mean and increase. Gravity was suspended for years by low interest rates due to central banks policies. What do the numbers tell us today ? Global markets are trading in line with their 20 year history. The US market overall is expensive compared to its own history and compared to the rest of the world. European equities are cheap and the UK looks like a real bargain on the simple forward Price-to-earnings ratio.