HEFT Minisode: Are stock market valuations bubblelicious?
In this episode, Andrew Chiguri and John Bennett, Portfolio Manager of Henderson European Focus Trust, discuss global stock market valuations, areas where valuations are looking stretched and sectors where he is finding opportunities. John also touches on what could derail the strong performance we have seen from growth stocks in 2022.
Key takeaways
- Certain segments of the equity market are looking ‘bubblelicious’, despite higher inflation, global supply chain bottlenecks, and tightening monetary policy concerns.
- In Europe, valuations within technology and health care-tech (equipment) names are looking very stretched. From a sector perspective, valuations within small-cap and mid-cap growth names also look very high.
If 10-year yields were to steepen meaningfully on the back of higher inflation concerns; this would pose a significant risk to the performance of growth stocks.
Catch up on previous episodes of Trust Radio
Growth stocks ExpandA growth stock is any share in a company that is anticipated to grow at a rate significantly above the average growth for the market. These stocks generally do not pay dividends. This is because the issuers of growth stocks are usually companies that want to reinvest any earnings they accrue in order to accelerate growth in the short term.
Inflation ExpandThe rate at which the prices of goods and services are rising in an economy. The CPI and RPI are two common measures.
Valuation metrics ExpandMetrics used to gauge a company’s performance, financial health, and expectations for future earnings eg, price to earnings (P/E) ratio and return on equity (ROE).
Yields ExpandThe level of income on a security, typically expressed as a percentage rate. For equities, a common measure is the dividend yield, which divides recent dividend payments for each share by the share price. For a bond, this is calculated as the coupon payment divided by the current bond price.
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These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.
Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
The information in this article does not qualify as an investment recommendation.
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