TT International – Markets Have ‘Growing Risk And Inadequate Potential Return’

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TT International – Markets Have ‘Growing Risk And Inadequate Potential Return’

Even though US equity markets have had a rocky first quarter, and economic data is mixed at best, the bullish attitude is still in high gear, and successful value investors across the board have warned that when the market is happy we should be cautious.

“Optimists argue that the US and Europe are gradually recovering, Japan is successfully combating two decades of deflation, monetary policy will remain loose given that inflation is shackled, and though P/E ratios are high, they are not yet stratospheric,” writes Tim Tacchi, Chief Investment Officer at TT International, one of Europe’s largest hedge funds, in a recent white paper sent to investors. “There is some merit in all of these arguments.”

Global CAPE shows an overheating market

But Tacchi is also worried about the lack of concern over problems that are both obvious and potentially harmful down the road. While equity prices was soaring, consensus world GDP was falling for most of 2013, and has been volatile but trending fla