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The consensus view that US equities are in a bubble are overblown due to several dynamics: index composition; low interest rates; robust forward earnings expectations; and, economic cycle positioning. The biggest obstacle with current market expectations is a double-dip recession which remains a remote possibility based on the positive output of 12 economic indicators that have historically foreshadowed an economic downturn. In fact, economic growth in the US this year is posed to be the best in almost four decades as US consumers and corporations have fortified their balance sheets in the wake of recent lockdowns. Policymakers are suffering from recency bias by mistakenly treating this recovery like the Global Financial Crisis. However, the backdrops between the two could not be more different which sets up a scenario where US equites will continue their ascent higher in the coming year. Go back to the drawing board when it comes to your views on US valuations - because this time IS different.

In the early and middle stages of an economic expansion, running with the herd can be a beneficial and safe proposition. As this recovery unfolds, should investors break off, worried about the formation of a bubble?

Jeff Schulze | 0.50 CE

In the US, a durable and economic bottom has formed, and global investors are well-served to re-frame their mindset towards the incipient economic expansion now underway.

Jeff Schulze | 0.50 CE