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After Last Week’s Sell-off: More Volatility Ahead
February 05, 2014 at 19:00 PM EST
After a rocky first few weeks of the year, U.S. equity markets fell sharply last week. The media blamed much of the decline on market turmoil in emerging markets. China reported some surprisingly weak economic data, and financial turmoil in Argentina and Turkey led to a sell-off in EM currencies. But while EM volatility certainly contributed to investor angst, I believe last week’s equity market sell-off had more to do with two other factors, as I write in my new weekly commentary. 1. Stretched Valuations. Last year’s gains were powered mostly by multiple expansion – investors were willing to pay increasingly more for a dollar of earnings. In fact, 2013 saw the largest single-year increase in market valuations since 1998. In addition, not only did stocks become more expensive, but bonds became cheaper. As a result, many large institutions are rotating back into bonds, contributing to pressure on equities. 2. [...] Click here to read the original article on ETFdb.com. Related Posts: No Related Posts
After a rocky first few weeks of the year, U.S. equity markets fell sharply last week. The media blamed much of the decline on market turmoil in emerging markets. China reported some surprisingly weak economic data, and financial turmoil in Argentina and Turkey led to a sell-off in EM currencies. But while EM volatility certainly contributed to investor angst, I believe last week’s equity market sell-off had more to do with two other factors, as I write in my new weekly commentary. 1. Stretched Valuations. Last year’s gains were powered mostly by multiple expansion – investors were willing to pay increasingly more for a dollar of earnings. In fact, 2013 saw the largest single-year increase in market valuations since 1998. In addition, not only did stocks become more expensive, but bonds became cheaper. As a result, many large institutions are rotating back into bonds, contributing to pressure on equities. 2. [...]
