Tuesday, May 24, 2011

Margins & Profit Shares At New All-Time Highs

Right, this is about our expectations, apparently. Gerard Minack at Morgan Stanley writes today:

The only way equities look cheap on a through-the-cycle earnings basis is if earnings are heading higher and stay higher (through the cycle). It so happens that the sell-side consensus expects this. It is forecasting 30% EPS growth over the next two years for developed world equities. This implies margins and profit shares at significant new all-time highs.

Click on chart to enlarge, courtesy of Morgan Stanley.

Well, at the end he made the conclusion as follows:

But the bigger-picture point is that equities have priced in a higher structural range for earnings. Equities may be cheap if earnings move into a new, even higher range. Otherwise, they appear expensive or very expensive.
Unusually bearish for sell-side consensus?

No comments:

Post a Comment