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Garnry: Why we need an equity correction
European shares are in dire need of a correction… that’s according to Saxo Bank’s Head of Equity Strategy, Peter Garnry. The STOXX 600 is up by a half since the dark days of September 2011 yet earnings expectations are coming down. Peter says that’s unsustainable.
The forward earnings multiple on the STOXX 600 is key. Shares are trading around 14.5 times earnings right now and Peter points out that even at the peak of 2007, investors were paying less. Today we’ve got lower growth figures and notably, Europe is still mired in an economic mess.
Peter believes it would be “helpful” if some of the steam were let out of equities. Pointing to the German Dax index, which is currently trading above 9,000, he says a key resistance test would be around the 85-8700 level.
However, it’s important to point out that the longer term outlook for equities is very positive, according to Peter. He says he’s still quite bullish on the macro front for 2014 but in the short term, we’ve just come a little too far.
01:38 minutes
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