This note reviews the reporting season just ended and equity market valuations.

The key points are as follows:

– While profits for Australian listed companies fell over the last year, the profit reporting season just ended has been far better than expected. This has been the case globally and share analysts’ earnings expectations are now being revised up, signalling the likely start of an upgrade cycle for profits after two years of downgrades.

– While shares are no longer dirt cheap, following rebound from March, they are not expensive either.

– Notwithstanding inevitable corrections, further gains are likely as the earnings outlook continues to improve and the broad cyclical backdrop remains very positive.

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