Rich but not crazy. That’s global equities.
Bubble coverage took a backseat to cockroach coverage across the mainstream financial media this week courtesy of Jamie Dimon, whose remarks on JPMorgan’s quarterly calls are always good for a headline (or two or three or 20).
Thanks to Dimon, all anyone wanted to talk about were roaches which, in addition to being inherently off-putting, felt overwrought. Yes, some banks have bad loans sitting on their balance sheets. Yes, there’s some fraud out there. No, the sum total of it (the bad loans and the fraud) probably doesn’t represent any sort of systemic risk.
Anyway, once bank earnings are in the rearview, expect the bad loan coverage (the “roach” coverage) to dry up absent evidence of contagion. In its place will be more bubble coverage. With that in mind, consider the two charts below, from the latest installment of BofA’s weekly “Flow Show” series.
We’re used to thinking in terms of US benchmark multiples, so it’s helpful on occasion to pan out to the global context even as “global” equities are almost synonymous with US stocks due to the weight of America’s mighty mega-caps in any and all cap-weighted benchmarks that include US shares.
As the figure on the right shows, the most widely-cited global equity benchmark — the MSCI All-Country World gauge — trades on a 19.5x forward multiple, three and a half full turns richer than the four-decade average, but below the 2021 peak and nowhere near dot-com bubble levels.
The figure on left shows BofA’s global EPS growth model, an indicative metric that tries to forecast profit trends. If you squint, you can see it currently “predicts” a better outcome than consensus — 9% growth versus 7%.
The bank’s Michael Hartnett cited stronger Asian export growth, global PMIs above 50 and looser financial conditions in China in explaining the upbeat model output. Global stocks, he wrote, are “pricey but not exorbitant.”
He tossed out a notable statistic. US shares have accounted for 46% of the total $548 billion YTD inflow to equity funds. In 2024, that figure was 72%.
