Abstracts » Business

Wall Street: stretched?

Article Abstract:

US bond yields have risen and this means that equities appear overvalued using traditional measures. The high ratio could be sustainable for three reasons. Dividend yields are low due to stock buy-back being chosen as a way to use profit, instead of dividend increases. Long term profit growth prospects appear good. There is also a large amount of funds being invested in equities from the public through mutual funds, and the flow of funds could rise if tax revenue is invested in equities.

Capital market, Capital markets

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Wall Street: earnings fears

Article Abstract:

US share prices could be affected by lower corporate earnings in 1996. Economic growth could be as low as 1.3% in 1996 compared with 3.2% for 1995. The different elements of demand such as consumption, investment and public spending are all likely to fall in 1996, argues James Capel's David Bloom. Optimists argue that lower earnings are already taken into account in the market price for shares. This may not be the case, and if it is not so there are concerns about the stock market.

Finance, Corporations, Corporate finance

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Wall Street: cheap and nasty

Article Abstract:

Share prices are relatively inexpensive in the US measured by using a price-earnings ratio on the composite index of Standard and Poor's, and judging by low bond yields. This judgement is despite a 36% rise in the price of shares. Shares could thus perform well during 1996, but this valuation method has not always served as an accurate way of predicting future rises. The relationship did not function in 1990 or 1994, and shares may not perform well just because they are cheap.

Economic aspects, Securities industry

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