2016-04-07telegraph.co.uk

Wall Street equities are more stretched by a host of measures than they were at the peak of sub-prime bubble just before the Lehman crisis. All it will take to bring the S&P 500 index back to earth is a catalyst, and that is exactly what is coming into view on the macro-economic horizon.

...

Strategists Mislav Matejka and Emmanuel Cau, from JP Morgan, have told clients to prepare for the end of the seven-year bull run, advising them to trim equities gradually and build up a safety buffer in cash. "This is not  the stage of the US cycle when one should be buying stocks with a six to 12-month horizon. We recommend using any strength as a selling opportunity," they said.

Their recent 165-page report on the subject is a sobering read. The price-to-sales ratio (P/S) of US stocks is higher than any time in the sub-prime boom. Share buy-backs are at an historic high in relation to earnings (EBIT). Net debt-to-equity ratios have blown through their historical range.

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The economy has added 1.4m jobs over the last three months - to 151,320,000 counting total numbers employed - drawing deeper from labour reservoirs of unknown depth... [but] there is a nasty catch in these happy figures... productivity - or GDP per worker/hour - is actually falling. "US companies are hiring people frantically because they are unable to get more out of their existing workforce. This is not a good omen," [JP Morgan's chief US economist] said.

... It means the US economic speed limit is collapsing, with dire implications for the debt trajectory and the pension system. Business is soaking up labour slack rather than investing in technology. The cycle will hit the inflationary buffers sooner.



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