10/3/2018 – A positive day with the Dow Jones up 54 points (+0.20%) and the Nasdaq up 25 points (+0.32%)
The stock market finds itself at an incredibly important juncture. Things are about to move. If you would like to find out what happens next, based on our timing and mathematical work, in both price and time, please Click Here.
Not that anyone investing in the stock market today cares, but earning estimates are feverishly collapsing.
Peak Earnings: Companies Furiously Guide Earnings Estimates Lower
In contrast to the forward PE, the current Shiller PE Ratio is 33.49.
The only time the cyclically-adjusted PE was higher was during the dot-com bubble. But unlike now, there were plenty of companies with low PEs and excellent profits in 2000.
Energy companies were a standout example. Now, we are in a “damn near everything bubble”. Affectionately called the “everything bubble”.
Gold is now one of the few and far between non-bubble standouts. Some might even disagree with that.
Here is another way to look at all of the above.
Forget forward guidance or anticipated slowdown in earnings. In order for the stock market to revert back to its mean Shiller P/E of 16 it would have to slide 55%. Today.
And we are not even talking all the other headwinds the market might be facing in the very near future. For instance, massive budget deficits, rising interest rates, massive margin debt in the stock market, everything bubble, trade war, Trump, QT, etc…..
If we assume that earnings recession is ahead and the S&P earnings collapse from 115 today to let’s say 80, a modest drop considering today’s environment, the market would have to drop about 70% to reach its Shiller’s Adjusted P/E of 16. And we are not even talking about overshooting on the downside.
Will such a move down ever develop?
We might have an answer.
If you would like to find our exactly what the stock market will do next, based on our mathematical and timing work, in both price and time, please Click Here
