UPDATE: Here's why the stock market is still the 'cleanest dirty shirt'
By William Watts, MarketWatch
Barclays on the case for being 'uncomfortably bullish' on equities
Think the stock market is overpriced or maybe even in a bubble? Think again, say analysts at Barclays.
In the note, entitled "Uncomfortably Bullish," they argued that global equity valuations remain in line with longer term averages and below the previous cycle peak, while the outlook for global earnings per share remain the best in nearly five years. Compared with other pricey assets, equities remain the "cleanest dirty shirt" available to investors, they argue in one chart (see below).
That doesn't mean there aren't sources of worry, including stretched U.S. stock market valuations, wrote the analysts led by Dennis Jose. The Shiller cyclically adjusted price-to-earnings, or CAPE, ratio at 30.6 remains very elevated, they acknowledged. The valuation measure, popularized by Nobel-winning Yale economist Robert Shiller, has been higher twice before, in 1929 and 1997, they noted (see chart below).
Read:Welcome to the second biggest bull market since World War II (http://www.marketwatch.com/story/welcome-to-the-second-strongest-bull-market-since-world-war-ii-2017-09-20)
(http://www.marketwatch.com/story/welcome-to-the-second-strongest-bull-market-since-world-war-ii-2017-09-20)Also see:Stocks--at their 4th most expensive level ever--are 'smack dab' in 'bubble territory' (http://www.marketwatch.com/story/stocks-at-their-4th-most-expensive-level-ever-are-smack-dab-at-the-heart-of-bubble-territory-2017-09-22)
Like many others, they see Europe as more attractive than the U.S., with a target for the pan-European Stoxx 600 of 400, a gain of 4% from its current level. Valuations aren't yet pricing in an earnings catch-up, with European stocks cheapest versus the U.S. since 1976, they said. And they're not concerned by a strengthening euro , arguing that the shared currency's strength year to date is offset by upgrades to economic growth prospects.