At current
U.S. dollar valuations we still maintain hedge positions on three of the Fund's currency exposures.
Not exact matches
The surge in EM
valuations comes at a time when we believe the
dollar could resume its upswing and
U.S. policy uncertainty is high.
The impact of a stronger
dollar is likely to remain a hurdle for earnings, but
U.S. equities are also contending with high relative
valuations and a likely increase in interest rates by the Federal Reserve (Fed) in the second half of this year.
Valuations are converted to
U.S. dollars at current exchange rates... Read our complete methodology →
We think company
valuations are still compelling; genuine reform in two of the larger emerging market economies, China and India, should help to rekindle the global economy; and the stronger
U.S. dollar should help generate positive earnings in most foreign companies.
As usual, I don't place too much emphasis on this sort of forecast, but to the extent that I make any comments at all about the outlook for 2006, the bottom line is this: 1) we can't rule out modest potential for stock appreciation, which would require the maintenance or expansion of already high price / peak earnings multiples; 2) we also should recognize an uncomfortably large potential for market losses, particularly given that the current bull market has now outlived the median and average bull, yet at higher
valuations than most bulls have achieved, a flat yield curve with rising interest rate pressures, an extended period of internal divergence as measured by breadth and other market action, and complacency at best and excessive bullishness at worst, as measured by various sentiment indicators; 3) there is a moderate but still not compelling risk of an oncoming recession, which would become more of a factor if we observe a substantial widening of credit spreads and weakness in the ISM Purchasing Managers Index in the months ahead, and; 4) there remains substantial potential for
U.S. dollar weakness coupled with «unexpectedly» persistent inflation pressures, particularly if we do observe economic weakness.
We composed a blend of five key
valuation metrics — including forward price - to - earnings ratios and price - to - book value — and examined how strong the relationship was between starting
valuations — or
valuations at the time of purchase — and the variability of subsequent
U.S. dollar returns over time.
A weaker
U.S. dollar, too, has helped in recent months, as have lower, attractive
valuations relative to developed - market equities.
A stable
U.S. dollar, economic reforms, improving corporate fundamentals and reasonable
valuations support the asset class, we believe.
First, because of a weaker
dollar — but also due to: low
U.S. interest rates; loose financial conditions; and greater margin of safety compared to
valuations for most of the developed world.
Rather, the current economic downturn is likely to focus its damage on asset prices - the
U.S. dollar, home values, low and mid-quality debt, and equity prices (largely through the combination of narrowing profit margins and lower
valuations).
We composed a blend of five key
valuation metrics — including forward price - to - earnings ratios and price - to - book value — and examined how strong the relationship was between starting
valuations — or
valuations at the time of purchase — and the variability of subsequent
U.S. dollar returns over time.
The surge in EM
valuations comes at a time when we believe the
dollar could resume its upswing and
U.S. policy uncertainty is high.
2The Bloomberg
Valuation Service (BVAL) curve is populated with
U.S. dollar - denominated senior - unsecured fixed - rate bonds issued by domestic companies with a BBG rating of investment grade.
This is because their
valuation depends on the market and demand from investors, which ultimately revolves around the use of the
U.S. dollar.