I’ve always liked Andrew Garthwaite’s work at Credit Suisse. In a recent note he discussed the biggest risks to the market (via Business Insider):
“Overall, we continue to believe that equities would have a meaningful correction (i.e. 10% or more) only after one of the following events occurs:
(1) There is a clear monetary shock with interest rates rising: we think this is likely to be a mid-2015 event in the US;
(2) Equities become clearly expensive against bonds (i.e. the US 10-year bond yield rises above 3.5%);
(3) Risk appetite indicators hit euphoria;
(4) A global macro shock (the most likely candidates being a sharper-than-expected slowdown in China or political shocks in peripheral Europe).”
Garthwaite says the market might stagnate in the near-term but will be “significantly” higher in the next 6-12 months. Also interesting to note is CitiGroups indication that equities are in the euphoria level. Then again, complacency seems to have been a persistent trend all year and that hasn’t stopped us from marching higher.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.