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2012. Equity Outlook.

2012. Equity Outlook.

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2012 Equities Outlook
2012 Equities Outlook

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Published by: macrovalueinvestment on Jan 12, 2012
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01/12/2012

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2012
[2012: EQUITY MARKETOUTLOOK] 
Summary of 2012 outlook with forecast direction of equities based on fundamental econometricanalysis. The forecast is for very positive conditions in equity markets. 
 
 
1
Summary
Market Sentiment
 
Surveys suggest that fund managers have low market exposure, a possible cyclical low.
 
US markets have had record retail fund outflows - setting the stage for arally.
US Markets: Dow Jones
 
Consensus earnings fair value model shows market is cheap and trending strongly upwards. Current fair value estimate is
13,254(+6.5%)
.
 
Economic earnings indicator confirms strong growth in earnings per share.
 
Company financials are very strong on all factors including top linerevenue growth per share, earnings per share, dividends per share, cash flow, free cash flow, sustainable debt levels and shares issuance.
 
Low interest cost on debt will continue to fuel earnings growth capacity.
Australian Markets: S&P200
 
Consensus earnings fair value model shows market is cheap and trending upwards. Current fair value estimate is
5,001 (+19.4%)
.
 
Economic earnings indicator confirms strong growth in earnings per share. Fair value indicator predicts a new upwards trend in equities
 the
 first time since 2006
with a directional target of 5,238.
 
Company financials are very stable, but haven
’ 
t improved as much asDow Jones companies. It appears that too much cash is being held, whichcould potentially be used to fund growth.
 
 
2
Market Sentiment
NAAIM Survey
The NAAIM survey is based on active money managers representing their overall equityexposure on a weekly basis.
 
Money managers have very low equity exposure and typically current levelsrepresent a bottom in the markets. This is very positive for equity marketpotential.
US Equity Market Fund Flows
 
Source: Zero Hedge 
Retail fund flows in and out of equities is a lagging and contrarian indicator.Retail investors are usually the last to
get it
and often buy high and sell low.Fund flows have been going out for years, meaning that there is a hugeamount on the side-lines that can sustain an ongoing market rally.

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