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Pragmatic Capitalism

Capital for Living a More Practical Life

IS THERE A BULL CASE FOR EQUITIES – 3 BIG “IFS” FROM DAVID ROSENBERG

David Rosenberg asks the all important question – are there drivers that can sustain further gains in equities after a huge advance.  Via this morning’s note:

“Is there a bull case for equities?

Well, after a 20% pop off last October’s lows, that would seem like a pretty strange question to ask.

But what is most important is not looking through the rear-view mirror, but driving ahead by focusing on what is happening through the front window.   With that in mind, we now need to build some assumptions to get to the bull case…

If…

This housing recovery story in the US has more legs than just balmy seasonal December weather, and

If…

China manages to navigate its economy to a soft landing instead of a hard landing, and

If…

Europe can hang in…

Then…

One can build the assumption that, if all goes well, the forward PE multiple reverts to 15X, where it was before the trap door opened up last spring…”

Source: Gluskin Sheff

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