Mr O’Brien noted the ASX 200 was trading on 11 times forward earnings, the MSCI World index on 12 times forward earnings, and the MSCI Emerging Markets on 9.5 times forward earnings. “These are not outstandingly good valuations but they’re not bad,” he said. “Compare equities to something like Australian residential property, where the P/E might be 30 times.”

However, the uncertainty over the European debt crisis and general economic uncertainty would continue to act as an impediment to an upswing in equity markets in 2012.

Similarly, investors were likely underplaying the potential for political and economic turmoil to damage markets and other threats like a potential breakout in inflation. “We still believe that political risk as it affects market returns is underrated as we did in 2011,” Mr O’Brien said. “Iran, the Arab world, Latin America, even stable countries like Thailand could all have problems this year.” Mr O’Brien said. “That informs our short term view on emerging markets, which is that they are a strong long-term growth story but not enough attention is paid to the political components of those stories.”

But after several years of poor returns and the loss of faith by many investors in shares, the contrarian investor would see this as a signal that the asset class was turning the corner, Mr O’Brien said.

“The difference between the benchmark US Treasury bond yield of less than 2% and the equity earnings yield of 8% is as stark as ever,” Mr O’Brien said.  “We can certainly say that piling into low-yielding assets, like bonds, at ever-higher prices isn’t a long term solution.”

He added that volatile markets this year would test the nerves of value investors but that the strategy had proven itself over the long term.

Mr O’Brien expands on his views in an article and video in the new February issue of the van Eyk View, van Eyk’s monthly investment newsletter for financial advisers and industry professionals, which is now available on the iPad.

The post Equities good value but markets will probably underestimate the risks again appeared first on AdviserVoice.

The app is an expanded, monthly version of van Eyk’s long-running client newsletter, featuring the best in investment research news and views from our research and asset consulting teams.

For the first time the newsletter has also branched out to include the views of key figures in the wealth management and advice industries as well as those of individual financial planners.

The app also links to exclusive content for subscribers to van Eyk’s iRate ratings and research platform.

van Eyk chief executive Mark Thomas said the app was the culmination of many hours of planning and development and reflected van Eyk’s commitment to adding greater value for its clients and providing them with the most technologically advanced tools.

“The iPad opens up a wonderful opportunity for us to communicate our ideas and the depth of our research more fully and in more engaging ways,’’ Thomas said.

In the first issue, Head of Research John O’Brien looks at why investors should keep faith in equities, Portfolio Manager Otto Rieth asks “Is Qantas cheap enough?” and Head of Asset Consulting Jonathan Ramsay looks at the benefits of dynamic asset allocation.

The van Eyk View is available now for clients and industry professionals on the iTunes app store. Search for “van Eyk” or follow the link. 

http://itunes.apple.com/au/app/the-van-eyk-view/id476210180

The post The new van Eyk View iPad App appeared first on AdviserVoice.