- "We look at the situations of the United States, the euro zone, the United Kingdom and Japan and we compare trends in share prices and EPS (earnings per share). A significant difference in these developments can result from:
• marked changes in the determinants of PER (and therefore of long-term interest rates and growth);
• "parasitic" influences on stock market prices; for example sluggish growth in consumption can depress demand for stocks and stock market prices, even if EPS are on the rise."
- "The elasticity of stock market indices to EPS is too low, and above all in Japan where it is virtually zero. We show that in all likelihood:
• the changes in the determinants of PER do not explain the bias between stock market indices and PER;
• the trend in household consumption explains stock market indices better than EPS, and the slowdown in consumption plays a part in the weakness of the elasticity of indices to EPS, especially in Japan."
Natixis Special Report 20100709
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