INVESTORS WEEKLY
September 9th, 2013
   
     
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  The Confluence of Fundamentals and Valuations:
Are we at a Fork in the Road?
August 13th, 2013
by James Swanson, CFA | MFS Chief Investment Strategist
 
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In this article, James Swanson, CFA, MFS Chief Investment Strategist, shares his insights on economic recovery and broadly better GDP results:
  • Since recession, a recapitalization of the banks has occurred, the US Federal Reserve has injected hundreds of billions of dollars into the system and recovery has turned into expansion as the United States became one of the few OECD countries to have its GDP rise above its previous high-water mark.

  • All of this led to a robust profits recovery, and this fundamental trend led US stocks up to new heights from the lows of 2009.

  • The S&P 500 Stock Index has gained nearly 150% since its March 2009 low mark of 666.

  • In addition to record free cash flows from S&P 500 companies, lower debt burdens, high profit margins and high cash balances have all characterized and justified the market’s strength and upward momentum.

  • Nonfundamentals, such as valuations, are important as well. They tell us if the market could be paying too much or too little for those fundamentals.

  • Bull markets can have a life of their own, but it is always safer to stay with a market that is growing in parallel to the fundamentals rather than ahead of them.

 

 

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