Comparing the average PER of a current stock market index with what it was historically is a simplistic approximation and can lead to wrong conclusions. In fact, we should take into account the differences in ROE. In the big stock market indices (S&P 500 in the US, Euro Stoxx 50 in the Eurozone) companies with a greater ROE have been gaining more weight.
US companies’ profits have exceeded forecasts by 4.6%, the European ones by 2% and Japanese firms by 6.7%. This has fuelled a strong rally in the stock markets in just a few weeks. But is there room for the markets to rise further?
BNP Paribas | June 4, 2015 | In many respects the Japanese QE experience since 2013 is a pretty good playbook for European equities.
The Corner | April 11, 2015 | It’s not just the Nikkei beating historic records: European equities continue to benefit from tail winds thanks to the low euro and improving macroeconomic figures. In the past week, climbs ranged from a shy + 0.10% on the Spanish Ibex, to a much stronger + 0.54% on the German DAX, representing a record for the index. The British FTSE rose by + 0.35%.