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GDP data delivers profit warning

December 5, 2019
GDP data delivers profit warning

While the last few sessions on the ASX have seen the market tumble about 4 per cent amid fears that US President Donald Trump could hit every second nation with tariffs – China of course, but now Argentina and Brazil and possibly everyone in NATO – the ASX 200 is still 20.8 per cent higher in the year to date.

That gain has been sparked mainly by falling interest rates, which have forced investors into equities to chase returns. But according to veteran investor Dion Hershan, managing director and head of Australian equities at Yarra Capital Management, low interest rates can hide a multitude of sins.

The ASX might not look overly expensive at 17 times forward earnings – a 10 per cent to 15 per cent premium on the long term average – but this doesn’t tell the whole story.

“I don’t think you’d look at the averages and say that’s problematic. But it’s when you look inside the average that you find problems.”

Read more…. (subscription to The Australian Financial Review required)