"We believe that there is a hierarchy of ways to achieve performance. The best way is for companies to grow sales. Second-best, if they can't grow volume, is to have the pricing power to keep revenues growing even if sales are flat. Third-best is being able to cut costs. And lastly, is to use surplus cash flow to buy back stock and pay dividends. If the world is going to be stagnant, it's better to have companies who can do all that, including the last, than those who cannot."

David Fuller's view On average, many companies have been finding it harder to generate profits over the last six months, due to a soft global economy. While most global Autonomies remain in a strong position, it has been harder to increase sales or prices. They have certainly used technology to cut costs and will continue to do so over the longer term. However, for efficient companies there are limits to additional technological enhancements in the short to medium term. Consequently, they have used surplus cash flow to buy back stock, and some have even borrowed to do this, flattering earnings in the process. Borrowing to buy back shares will mostly end with QE, although this is not a near-term prospect.

In conclusion, the better performing stock markets, led by Wall Street, are overvalued relative to the slow-growth environment, although they are still being held up or at least cushioned on the downside by QE.