Gluskin Sheff analyst David Rosenberg has good news and bad news.
The good news: Earnings have been rising while the market has been correcting, which has helped cut the degree of overvaluation in half.
The bad news: the ECRI leading economic index foreshadows a deceleration in real GDP growth, to 1.5 percent in the second half of the year from the 3.75 percent average pace since the recession technically appeared to have ended around mid-2009. Because of that, the S&P 500 Index may fall more than 20 percent.
"The S&P 500 level that would be consistent with that sort of pace would be closer to 850 than the current level" of about 1,100, Rosenberg wrote in a note to investors.
"In other words, there is still more air to come out of the balloon." (more)
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