In a previous post, I outlined my long-term concerns for US equities, though I remain relatively constructive on the intermediate term outlook for stock prices (see How stocks are both cheap AND expensive).
Belski long-term bullish
Now BMO strategist Brian Belski has taken a mirror image of my views, which is long-term cautious but short-term bullish, with a long-term bullish but short-term cautious stance. First, Belski explained his bullishness based on the thesis that we are seeing a secular bull market after a Lost Decade and therefore long-term equity return expectations of 10% are plausible (via FT Alphaville):
Secular Bull Markets Are Born Out of Lost Decades: Based on historical evidence, stocks typically enter a very long period of expansion after emerging from a period of negative 10-year holding period returns. We found that, on average, these periods last for roughly 15 years and deliver average annual returns of about 16%. Given that 10-year holding period returns emerged from negative territory a little over five years ago and currently stand at 5.5%, it is not unreasonable to assume that there is about 10 years and 10% of average annual returns left to the current bull market should performance follow historical patterns.
Short-term cautious
On the other hand, Belski was featured in a recent Financial Post story with the title "5 Signs Canadian Stocks are Frothy", namely:
- Forward P/E ratios are near the highest level since 2000
- More than 35% of TSX companies are hitting 52-week highs
- Volatility is at a record low
- Stock performance is significantly outpacing underlying commodities
- Recent TSX outperformance has been highly concentrated in energy stocks
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