This month, Jason Weaver gives a market update on strong dollar, normalization of business valuations and a business cycle update.
STRONG DOLLAR
Analyst generally expect the dollar to continue its strength into end of 2022
Drivers of Dollar Strength
Higher interest rates in US
Stronger economic growth expectations vs Europe & Asia
Flight to quality “Safe haven”
Affects
Cheaper imports & foreign travel
Slowing exports & corporate profits
NORMALIZATION OF BUSINESS VALUATIONS
P/E is a widely used ratio to value a company
The 2022 market sell off has brought P/E ratios back down to historical levels
Small & Mid Cap US companies now trade under their historical P/Es
BUSINESS CYCLE UPDATE
The outlook for the world’s major economies has become more complicated and differentiated
Most countries (including the US) are in a maturing mid-cycle phase
Quality & Minimum Volatility stocks tend to outperform in a maturing cycle
