Global equity market price-to-earnings ratio are now trading at a 15 year high and average earnings per share sit at prior peak levels.
The World Bank forecasts that global growth will strengthen to 2.7 % in 2017 amid a pickup in manufacturing and trade, rising confidence, favorable global financing conditions, and stabilizing commodity prices.
You're not a member! Trial today
Growth in advanced economies is expected to accelerate to 1.9 % in 2017, a benefit to their trading partners. Growth in emerging market and developing economies will recover to 4.1 % this year, as obstacles to activity diminish in commodity-exporting countries.
Looking at the graph below, investors can see the difficulty the global economy has had in maintaining GDP growth.
We consider this an interesting contradiction to record PE valuations and EPS growth. For the most part, this is best explained through understanding the impact of share buy-back programs, helping to deliver financially engineered EPS growth.
