Gavekal Capital: Employment in the US & Stock Valuations

Wednesday, October 23, 2013

Employment in the US & Stock Valuations

For the last 40 years, the employment to population ratio has been well correlated with equity valuations.
As would make sense, when more people are working, income is higher, demand is more sustainable and investors rationally capitalize corporate earnings at a higher rates. When employment rates are low, the opposite happens. By this crude measure, stock valuations Should more appropriately be in the 10-15x range, rather than the 20-25x range.

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
We offer the Gavekal Knowledge Leaders Strategy in multiple products for global investors. For more information about our product offerings please visit http://www.gavekalcapital.com.
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