Analysis of previous market cycles shows that share prices can deviate substantially from reality, often for extended periods – over time share valuations are however supported by earnings which depend on sustained economic growth, and markets ultimately revert to normalised levels. It is particularly
difficult to forecast the impact of new technology on earnings as initial disruptors in an industry may be unseated by newer entrants who are able to replicate a business model more competitively. In this note we examine previous instances of market mispricing and reiterate our view that current stock
markets and share prices simply reflect the scale of quantitative easing rather than any longer-term common-sense considerations.