Bloomberg Writes: Bull Market Has Years Left for Shaoul on S&P 500 Values
Valuations in the Standard & Poor’s 500 Index increased by the most since the financial crisis last year as 460 stocks rose, more than any year since at least 1990. Neither are reasons to bet against equities now.
While Wall Street strategists are the most cautious in almost a decade after the broadest U.S. rally on record sent price-earnings ratios up 19 percent, expanding multiples have preceded advances twice as often as they have retreats, data compiled by Bloomberg show. Since 1936, the S&P 500 (SPX)has risen 69 percent of the time following quarters when valuations widened, the data show. The average return is 14 percent in years after more than 400 constituents climbed, according to data compiled by Strategas Research Partners.
“One sign that things are becoming more popular is they’re more expensive,” Michael Shaoul, the chief executive officer of Marketfield Asset Management LLC, which oversees about $19 billion, said in a Jan. 2 interview in New York. “I would be quite surprised if this bull market didn’t continue for another two to three years.”
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Most people, smart money, dumb money, institutions and money managers are panicking into stocks. I didn’t think it was possible, but as surely as night follows day, human psychology doesn’t change.
This is particularly true just a little under 5 years after everyone got their head handed to them during the 2007-2009 decline. A fascinating thing to watch from the psychological perspective particularly because we know, based on my mathematical timing work, that the last phase of the bear market is about to start. When we look at the market from such a perspective a number of things become apparent. First, even though the “real” fundamentals are terrible, if you are to listen to most people in the financial media the fundamentals have never been better. Then you have everyone predicting the continuation of the bull market for at least a few more years. To infinity and beyond.
Finally, there is a tremendous amount of psychological pressure on everyone to be back in the market. It seems like everyone is making money hand over fist and only the real BIG IDIOTS remain on the sidelines. Yet, we know the opposite is true. What we are witnessing now is the blow off phase of the bull market that is about to complete. Please do not forget that.
Interested in knowing exactly when the bear market will start? Please check out our premium section.
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Why You Shouldn’t Be “Panic Buying Stocks” Right Now