Can you elaborate what do you mean by “if the rates get lower, we can expect a normal market?” Are you implying that low rates are normal? Because IMO the low rates were an anomaly and rates being at 3-4% at an average seems normal, or a real rate of 2% at an average. If rates do not come down as per your expectations then do you expect your companies to do really bad? The way I see it is if they are companies growing earnings at 15-25%, within a few years they should overcome the PE expression that they would experience in a normal rate or higher rate environment (where normal rate as per me is 4%). You can have your PE compressed to half, but within 5 years the earnings will catch up to the earlier price levels with the new PE and within a decade it should 4x the price before PE compression, assuming 15% earnings growth. I see small cap, high growth companies as the winners in a normal or high rate environment… Would appreciate responses/discussions to my comment, would help me learn/unlearn… Cheers
Can you elaborate what do you mean by “if the rates get lower, we can expect a normal market?”
Are you implying that low rates are normal? Because IMO the low rates were an anomaly and rates being at 3-4% at an average seems normal, or a real rate of 2% at an average.
If rates do not come down as per your expectations then do you expect your companies to do really bad? The way I see it is if they are companies growing earnings at 15-25%, within a few years they should overcome the PE expression that they would experience in a normal rate or higher rate environment (where normal rate as per me is 4%).
You can have your PE compressed to half, but within 5 years the earnings will catch up to the earlier price levels with the new PE and within a decade it should 4x the price before PE compression, assuming 15% earnings growth.
I see small cap, high growth companies as the winners in a normal or high rate environment…
Would appreciate responses/discussions to my comment, would help me learn/unlearn…
Cheers