Janney Weekly Bulletin 1/23

January 23, 2013

The U.S. stock market is by no means expensive, but euro area, Japan, and China are way cheaper using price to book and forward P/E ratios for comparison.
-Investment Strategy Group, Janney Montgomery Scott

As Janney's investment strategy team looks ahead to additional earnings and housing data this week, they reflect on the 1% rise in the S&P that came last week, bringing it 5% below its all-time high from October 2007 (1565). Meanwhile, they see the U.S. deleveraging cycle being at least half over (a typical consumer deleveraging cycle that follows a credit-driven housing boom/bust lasts 5-7 years). Consumer delinquency rates and debt service burdens have fallen back to levels not seen since the early 1990s, and home prices are no longer falling. Household net worth is also close to the 2007 peak. Consumer and business spending growth should gradually accelerate as the deleveraging matures. In summary, the Group thinks the U.S. economy should be able to withstand the fiscal tightening coming from the increase in payroll taxes and other measures.

Some other notes from the bulletin include:

  • U.E. Economic News jobless claims have dropped to pre-crisis levels while inflation remains well contained.
  • Global Market Conditions why we continue to like international equities.
  • Janney has warmed up to materials where expectations have been lowered while global growth conditions are improving.

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