If you’re looking for signs of a top, the choices are beguiling. There are seven-year-olds trading ETFs, the Australian Financial Review is telling its readers how to launch their own crypto, pet-rock non-fungible tokens are selling for more than $US100,000 and the new bloods at ASIC are “going to be litigating as much as we possibly can” because the problems in financial services are “breathtaking”. If that weren’t enough, ABBA has a new album out.
Before you pull on the spandex to the tune of Dancing Queen, let’s look at the real world of share prices. Before the pandemic, it was possible to examine high-growth companies and see how current valuations might be reasonable in two years or so. Now it’s four or more. Price-to-sales ratios are common currency, as are double-figure daily share price moves. And many stocks look expensive on just about every measure.
How did this happen? As Adam Tooze writes in Shutdown: How Covid Shook the World’s Economy, “in a crisis like the one that hit the world in March 2020, only one thing will restore confidence: limitless cash”. The cash duly came and the confidence followed. Now it’s overflowing.
The recent reporting season was spectacular. After rising 16% in 2020, the S&P 500 in the US is up about 25% year to date with the S&P/ASX 200 down 2% last year and up about 10% so far this year. Those waiting for the pullback have been disappointed.
This story is from the December 2021 - January 2022 edition of Money Magazine Australia.
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This story is from the December 2021 - January 2022 edition of Money Magazine Australia.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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