US equity valuations at 40-year low

US equity valuations are at a 40-year low and represent an excellent opportunity for investors in the medium term, according to Jerome Nunan at Aviva Investors.

Client portfolio manager Nunan said the yield on US equities is now higher than that on 10-year treasuries, a phenomenon that has happened only once (in 2009) since 1972. Speaking at Investment Week’s US Focus 2011 conference in London last week, Nunan said the higher yield for equities signifies either a recession or that they are too cheap and poised for a rebound. He added the S&P 500 was trading on a P/E ratio of just over 12, compared to the long-term average of 16. “It all suggests a great opportunity for equities on a five to ten-year view,” he said. Within the equity universe...