Week in review
- Australia inflation for May 4.0% y/y
- Australia consumer confidence rose to 83.6 in June
- U.S. PCE inflation for May 2.6% y/y
Week ahead
- U.S. non-farm payrolls
- Eurozone CPI inflation
- Australia retail sales
Thought of the week
The rally in the U.S. mega-caps rolled on last week along with questions on building concentration risk and again the parallels to the booming market of the late 1990s. However, compared to the 1990s the technology names pushing the market higher are all profitable companies that will likely play an increasingly important role in the technology infrastructure of many economies. While market valuations are significantly higher, they are still well below the levels reached during the dot com era. Price-to-earnings is a common metric when valuing the stock market, but price to fee-cash-flow is also important. On this metric the market is only just above its long run average and around half of the peak in 1999. The seven mega-cap stocks now account for one third of the cap-weighted S&P 500 but a quarter of free-cash-flow. Concentration reflects corporate resilience and companies at the forefront of growth.
The S&P 500 look relatively inexpensive to the late 1990s dot com boom.S&P 500 price to free-cash-flow
Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management. Data reflect most recently available as of 28/06/24.
All returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.
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