Paul Taylor, Portfolio Manager at Fidelity Australian Equities Fund, says the market should be trading higher than current levels and provides two key factors that are supportive of this view. Firstly, Taylor says the quality of earnings have improved dramatically since the GFC as companies responded to difficult trading conditions. “As we went through the GFC, which was a near death experience for a lot of companies, they went from the aggressive to the conservative.” Taylor says this conservative approach has persisted in the post-GFC era. The result is superior earnings quality and robust balance sheets across corporate Australia. Secondly, record low interest rates are supportive of higher multiples. However on a PE of 16x and yield of 4.5% the market is only trading around its long-term average. In this short video, Taylor provides more detail on his view.