Monday, July 13, 2015

US stocks recovery is over says Gary Shilling


The Fed’s QE drove U.S. stocks, but it’s over. Corporate earnings in this recovery have been based not on solid revenue growth but on profit margin increases that have flagged as underlying cost-cutting and productivity gains atrophied. 

In the portfolios I manage, I have shifted to European and Japanese stocks, figuring that the bulk of QE money will end up in equities, as it did in the U.S. In the last 12 months the S&P 500 is up 9% versus 12% for Europe’s Stoxx 600 and 38% for Japan’s Nikkei. China’s quasi-QE, plus the recent individual investor switch from real estate to stocks, has already hyped the Shanghai index, which is up 150% in the last 12 months.