I am bullish on the markets for reasons cited below:
Equities are now in the hands of a relative few who stand to gain significantly when investors start creeping off the sidelines and out of the ‘safety’ of treasuries.
- Unsustainable yield differential between equities and treasuries
Never in modern history has the yield differential between these two been by so much and for so long. During both instances (GFC and bear market of 1974) the yield differential were so high, they lasted only for a few months, compared with its sustained position over the past 12 months.
- Strengthened operating margins and balance sheets (after buyback programmes and deleveraging)
Following the GFC, major companies have returned to their core competencies, reduced costs and lowered gearing levels, improving their competitiveness. Leverage levels in companies are now the lowest in 20 years.
We are still well entrenched in the early stages of scepticism, thanks in large part to the ongoing euro debt ‘crisis’, and persisting market volatility.
- Inflationary pressures could spark mass flight from treasuries to equities
extracted from "A bull market in the making?"
Written by Brad McFadden on February 19th, 2013
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