FMA Market Update – October 2015 Edition
October 13, 2015 | John J. Klobusicky CIO, CFA®, CAIA
The famous investor John Templeton often said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” Markets climb a “wall of worry,” and the return premium paid investors above and beyond risk-free Treasury notes is dependent on how big and how many blocks are in this wall of worry. Bull markets end when investors are no longer worried about anything, with the equity risk premium absorbed and baked into prices. We agree with the Citigroup Panic/Euphoria model shown below, and believe we are somewhere between the skepticism and optimism stage, and not yet at the euphoric level where we would be more concerned with current equity valuations.