The world economy is shifting away from a high-growth bull environment and undergoing macro, secular changes that will drag down stock valuations in 2023 and beyond, according to Tim Gramatovich, chief investment officer of Gateway Credit Capital.
The market conditions that lifted markets in previous decades won’t necessarily continue in the future, he told Insider.
“We had the perfect bull market cocktail starting in the early 1980s — incredibly low valuations and the beginning of globalization and all its benefits, huge growth, low costs,” he said, adding that slowing population growth threatens the productivity of the workforce. “We are now looking at the mirror opposite going forward: very bad demographics globally, and a spent dividend on globalization and technology. So extrapolating valuation over the last couple decades makes no sense.”
He expects these structural shifts to leave a larger impact than any cyclical market trends. For example, critical costs for services labor, energy, food, and capital are going to remain high over the long term, even as overall inflation data shows recent signs of cooling.
All this is poised to hinder global growth, Gramatovich warned, which leads him to believe that stocks should be trading closer to 10 times earnings, rather than today’s multiples of 18 or 20.
For stocks to stage a sustainable rally, company earnings must be strong and robust, he said, but that would likely push central bankers to continue raising interest rates, which would subsequently weigh on equities once more.
Meanwhile, he pointed out that small-cap companies in particular present a valuation trap.
“When the tide goes out, large companies with lots of liquidity tend to be very aggressive on pricing to cover their fixed costs, crushing smaller competitors,” Gramatovich said.
But while stocks are poised for a downtrend, the outlook on debt is brighter. Helped by central bank rate hikes, the loan market’s main indices offer roughly 9% yields, he said.
“The next decade plus looks like a potential golden era for corporate credit. Given the central banks’ actions — you now have real yields available in high quality names which we haven’t seen since before the [Great Financial Crisis].”
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
