Financial Times subscribers deserve more analysis and reflection from the paper’s lead commentator than another sterile discussion about the level of the S&P . Today Lex states that the S&P is too high. “valuations look toppy indeed”.
The column supports this view with references to the current S&P constituents average percentage profit levels, which at about 35% are high compared with the 29% historic average since 1947.
But it is glaringly obvious that as all the major stock markets have moved up and down in unison, an analysis of the ‘value’ level of a particular market by reference to its domestic history is inadequate
Whatever is driving the S&P is the same as that driving the SMI, FTSE, DAX etc – see the chart below.
The markets cannot be explained in terms value variables because the world markets are driven by something else.
What drives all markets together? Try, credit, price of credit, availability of credit, liquidity.
Capital asset market prices are driven by liquidity, its pointless in pretending any longer that their prices are determined by value.
I award Lex, 70% bun rating for this piece, and 30% meat.