Crispin Murray: is the market too expensive given current economic conditions?

Crispin Murray: is the market too expensive given current economic conditions? In this environment we are cautious, but not bearish on market valuations. The PE multiple is reasonably high on a ten year view, which does leave the market more vulnerable to some sort of exogenous shock. However this must be balanced against interest rates, which are expected to go lower from here and remain low for some time. In effect, policy makers are buying insurance as they see unemployment rising and mining capex continuing to fall. We do not see the Reserve Bank deviating from the current path until they see the rest of the economy start to kick into gear via higher consumer spending and increased investment as a result of a more competitive Australian dollar. At the same time, we are seeing increased foreign interest in local markets as a result of QE programmes in Japan and Europe and a weaker Australian dollar, providing further support for current valuations. What are we likely to see from here? Read more from Head of Equity Strategies Crispin Murray (VIEW LINK)