Market not cheap despite recent falls

ON EUROPE

Liontrust's James Inglis-Jones says volatility will remain high as investors lurch from hope of recovery to fear of recession.

Prior to the fall in stock markets that began in July but gained dramatic momentum in August, we were cautious about equities in general. This was because of the elevated valuation in markets as measured by book value and normalised earnings as well as the difficult macroeconomic backdrop, notably the developed world struggling to cope with the high levels of national indebtedness. We felt the view that companies were relatively cheap was misplaced because it was based on the flawed approach of applying current price/earnings. We believe a focus on normalised earnings or book value ha...