US Stock Investors: Increased Risks
Given what has been going on in economic terms globally, America is now stepping up its demands. Saying that there are so many more risks these days than there were just “a few months ago,” stock investors from the US are beginning to increase their demands. As well, things could get even worse since this week is when manufacturing and jobs data are due, causing investors who are already somewhat shy to keep mum about equity prices while they deal with limiting worldwide growth and a whole slew of other geopolitical risks “from the Arab Spring to debt defaults in the Eurozone."
Wall Street Bank Panic?
Actions from CitiGroup, Goldman Sachs and UBS indicate they feel investors are willing to pay less for a dollar of corporate earnings in 2011. This may seem somewhat ironic since according to New York UBS chief US equity strategies Jonathan Golub, while earnings are (surprisingly) going to continue to increase, simultaneous to that, investors will still be “reluctant to believe in the sustainability of earnings and, therefore, not give full credit to that.” Even in Golub’s case, the anticipated price-to-earnings ratio was far less than the amount investors have in the past been prepared to pay for S&P 500 earnings. The average earnings from this to last year increased $5 but still Golub’s year-end S%P 500 target remained at 1,425 which “effectively lowered [Golub’s] P/E ratio to 14.1” (a drop of .7). This means the expected equity yield increased from 6.8 percent to 7.1 percent. So, there is a way to go for US stock investors. But the news isn’t all bad and it still remains tough to predict exactly what will be in the coming months. Figures are changing but often very slightly, rendering the job of stock-market fortune tellers a tough one.