What will it take for U.S. investors to get over their fears about the global economy?
Almost four years into this seemingly never-ending recovery, even massive corporate profits haven't been enough to convince investors to really trust the equity markets.
No doubt, U.S. stock markets are climbing higher, so it's not as though no one's buying back in. Last week the S&P 500 hit its highest point since 2008, and the Nasdaq flirted with 3,000. But Bloomberg ran the numbers and found that at the S&P 500's current valuation of 14.1 times forward earnings, the index is cheaper than at any 52-week peak in the last 23 years.
That cheapness comes despite 99 per cent growth in profits between the end of 2009 and 2011, and despite growth projections of 12 per cent this year and 12 per cent next, according to Bloomberg.
As one of the people Bloomberg interviewed put it: "What you're seeing is a gigantic exercise in behavioural finance."
(Of course, the argument that kills Bloomberg's analysis is the one that says earnings projections are too high, which would bump the current multiple. But estimates are what they are.)
Tim Kiladze