Gavekal Capital: S&P500 P/E Expansion May Be Difficult Over The Next Few Quarters

Friday, February 7, 2014

S&P500 P/E Expansion May Be Difficult Over The Next Few Quarters

Over the past 10 years the S&P 500 Price to Earnings ratio and the real trade-weighted dollar index have had a nice correlation. As the dollar has strengthened P/E ratios have expanded (with a three quarter lead for the dollar). The level of the dollar has been relatively steady for the past 8 months which may mean, at best, P/Es will remain where they are today over the next few quarters.

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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