Valuation has become one of the major reasons that the bulls point to when buying stocks, but if you look at past troughs during bear markets you’ll notice that the stock market has never bottomed at such a high valuation during after a major cyclical bear market. According to Case Shiller’s rolling PE ratio the stock market PE is currently 15.8 – not expensive, but nowhere near past bear market troughs. This is consistent with Clarium Capitals findings. The long-term bulls are trying to argue that it’s “different this time”, but don’t bet on it….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
Trying to argue that this market is cheap at this point, in the face of these economic conditions, is either intellectually dishonest or stupid, IMO. We just haven’t wrung out of investors the same bogus thinking that led to the 2000 & 2007 tops.
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