What are the prospects for stock market indices?

- "In the short term, since 2008, stock market indices (we look at the S&P, the Eurostoxx and the CAC) have moved in line with risk aversion, which itself depends on economic news and concerns about some financial markets and some classes of borrowers."
- "In this Flash we look at a longer-term horizon, and we seek to ascertain what the economic environment implies for stock market indices."
- "It seems to us that:
• their stagnation in 2010 is consistent with the downward revision in growth prospects, and hence in PER levels, and investors are adopting a virtually deflationary equilibrium scenario, which is the most likely for the United States and the euro zone;
• subsequently (2011-2012), the indices can be expected to rise in line with earnings per share, which are rising rapidly because of the distortion of income sharing at the expense of wage earners."

Natixis Flash Economics 452 20100910

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