Weekly Mining Commentary
Global equity markets retreated last week primarily due to rising yields from a major sell-off in the bond market, amid expectations of an economic rebound and rising inflation expectations. As shown below, all the seven indices we track reported losses (orange bars). Rising yields typically result in lower equity valuations (from higher discount rates), and higher borrowing costs. The P/E ratio of the S&P 500 is currently 22.2x vs the long-term average of 15.3x (Source: Refinitiv). As we do not expect an economic recovery until H2-2021, we expect a market correction, and the P/E ratio to revert to its historic average.
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