Allianz CEO: ‘More Severe’ Equity Market Correction Is Coming


Mar. 27 2018, Published 12:11 p.m. ET

Allianz CEO commented on the equity market

On March 24, 2018, at the China Development Forum in Beijing, Allianz CEO Oliver Bate shared his view on the equity market.

Since the US presidential election in November 2016, the US equity market has been showing a bullish drive. The broader market S&P 500 Index (SPY) rose nearly 30% between November 2016 and March 2018. The expectation of various reforms, deregulation under the new government, and an improvement in various fundamental factors mainly supported the market movement. The equity market’s valuation is also high compared to its historical average.

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Market movement

Bate said, “Equity markets have really been buoyant for a long time now and valuations are extremely high, higher than you can actually justify based on fundamentals. Markets are starting to get jittery and we would expect a more severe correction over the medium to long term.”

The S&P 500 Index’s trailing PE (price-to-earnings) multiple is at 21.6x. SPY’s forward PE multiple is at 18.4x, which is higher than the historical average of 15.3x. According to Bate, the US equity market (DIA) (QQQ) and all of the major markets across the globe are showing higher valuation. Improved fundamental factors across the globe drove the equity prices higher.

The iShares MSCI ACWI ETF (ACWI), which tracks the performance of the global markets, rose 28% between November 2016 and March 2018. However, the possibility of a trade war is adding uncertainty to the market movement. The expectation of the Fed’s faster rate hike in 2018 is also impacting investors’ sentiment.

Next, we’ll analyze how the technology sector performed.


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