On some indicators equities look expensive – the CAPE ratio is the highest since the dot.com boom. But with interest rates at multi-decade lows, shouldn't equity earnings yields be low too? Rising interest rates pose a threat to valuations, but models suggest this could be offset as long as recession fears remain low.
How could investors not like technology stocks? They’re cool companies, led by charismatic CEOs making irresistible products. And what's more, they're posting amazing growth rates with stocks that just keep going up. I’m sure the bottom-up investment case is much more sophisticated than that, but today I want to lay out the strong macro case for tech stocks.
In at least one respect, I can identify with Millennials: FOMO. The ‘fear of missing out’ on things such as Game of Thrones, tickets to FC Cologne vs Arsenal, that perfect powder run on my snowboard holiday or front row seats at my daughters’ nativity plays. But looking at markets at the moment, it’s pretty obvious I’m not the only one with FOMO!