4/18/2016 – A positive day with the Dow Jones up 105 points (+0.59%) and the Nasdaq up 22 points (0.44%).
Before we get to that, consider the following.
- There’s another sign the US could be headed for recession
- Get ready for return of volatility: Bernstein CIO
- By this measure, the S&P 500 is overvalued by 72%
“The reality is, there should be a relationship between GDP growth and profit growth, and that has largely been absent. We’ve been supporting profits growth with things like share buybacks and other unsustainable factors, and fooling ourselves into thinking that that’s actually sustainable profits. What this is pointing out is that… we are paying too much for the growth that we can expect to get out of the S&P 500,”
Now, let’s take a look at the following valuation metric. Shiller’s Adjusted S&P P/E Ratio.
Coincidentally, both metrics tend to agree. The market is overvalued by 50-75%.
Now, an argument can be made that today’s zero interest rates, future earnings, lower anticipated dollar, etc…. justify current valuation levels. I don’t believe that such a “This Time Is Different” notion is appropriate here. Today’s environment is NOT that different.
Long-term metrics that measure internal health and valuation levels of the market agree. The overall stock market is in a clear bubble territory. Reminiscent of the 1929, 2000 and 2007 tops. If so, long-term investors should anticipate no further gains from this point on. If anything, they should prepare for a big drop…..if history is any guide. Invest accordingly.
This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.
(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. April 18th, 2016 InvestWithAlex.com
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