Posts filed under “Markets”

P/E vs S&P 500 (50 Years)

As promised, today brings us to the 4th in our series of charts:

P/E vs S&P500
click for larger chart


courtesy of Mike Panzner, Rabo Securities

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I’ll get into the significance of what this means to the markets later, but for now, note where the P/E is over the median, and its impact on market performance.

Stocks, while not terribly expensive, can not be called cheap by historical measures. An even more discouraging mesure on this comes from Clifford Asness of AQR Capital Management (via Mark Hulbert).  He calculated the P/E ratios for the entire market for the 1871-2003 period at ~11. That implies stocks are even less cheap (or more expensive) than the past 50 years implies.

Regardless of whether you take the 50 year or the 132 year perspective, the theory of Reversion to the Mean implies that stocks are likely to become cheaper so as P/Es revert. And one shouldn not expect the market to stop at fair value, as we have seen, the tendency is to overshoot on both sides.

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Our 3 prior Charts:

Category: Earnings, Markets, Psychology, Technical Analysis

1966-1982 Trading Range

Here’s the 1966-1982 trading range: > click for larger chart chart courtesy of Rydex Funds > If we are in fact in a long, post-Bull trading range — see our 100-year Dow chart — than this is year ~5 of what could be a 10-15 year secular Bear market. As the 1966-82 trading range above…Read More

Category: Markets

100 Year Dow Jones Industrials Chart

Have a look at this 100 year (actually, 105-Year) chart. I colored each “Market” appropriately — Green for Bull, and Red for Bear — to more clearly show what happens. Bull markets get ahead of themselves. At their ends, they tend towards excesses that take a very long while to recover from. When a long…Read More

Category: Markets, Psychology, Technical Analysis

4 Year Presidential Cycle

This is the first of 4 charts I plan on revealing this week. Each one will hopefully shed some insight into what we may expect in 2006. This chart shows what is known as the 4 year or Presidential Cycle. The theory behind this is that U.S. markets have a tendency to make a high…Read More

Category: Markets, Technical Analysis

Trading Before/After Holidays

Category: Markets

What are the odds of 2006 being a positive year?

Category: Investing, Markets

Be Careful with the Contrary Indicators

Category: Investing, Markets, Psychology

Richard Russell on Dow Theory

Category: Markets

YTD versus other time periods

Category: Financial Press, Investing, Markets

That Cheery Notion of Upbeat Economic News

Category: Commodities, Economy, Investing, Markets, Real Estate