Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

This Stocks Bull Market Is NOT Over Yet

Stock-Markets / Stocks Bull Market Jan 03, 2015 - 04:07 PM GMT

By: DailyWealth

Stock-Markets

Dr. Steve Sjuggerud writes: The U.S. stock market boom is nearly six years old... But the fun ain't over yet!

Yesterday, I showed you how stocks could go much higher... even as interest rates finally rise. And today I'll show one more reason why this great bull market is NOT over yet...

This reason is extremely simple...


Stocks are not expensive yet.

Typically, in major stock market peaks, stocks reach "bubble" valuations before it's finally over.

We are simply not there yet.

Let me explain why...

The most common measure of stock market "value" is the price-to-earnings (P/E) ratio. Basically, high is bad and low is good.

Today, the stock market (the S&P 500 Index) trades at a P/E ratio of 18.3.

The long-term average P/E ratio is around 16... So stocks today are somewhat more expensive than normal... but they certainly aren't outrageously expensive. (Stocks are actually trading at a P/E of 16 based on 2015 earnings estimates.)

The thing is, you can't just look at the P/E ratio by itself... that doesn't give you enough information. You have to look at the current economic situation as well.

For example, the economic situation in 1980 – with high inflation and high interest rates – was much different than today. It's not "fair" to compare 1980 stock values with today's.

In our office, we use a simple metric to better compare apples to apples – we add the P/E ratio and interest rates.

You see, the level of interest rates has a lot of information built into it... It has inflation expectations... economic growth expectations... and whether or not the Fed is being accommodative (implementing policies to stimulate the economy) or restrictive (implementing policies to "cool" the economy).

The point is, we need to know what's going on with earnings AND interest rates to know what's really happening with stock valuations.

The chart below takes the P/E ratio and adds short-term interest rates. If the P/E is 10, for example, and short-term interest rates are 5%, our indicator shows a value of 15.

It's that simple. (We did smooth out a few nasty recessions that forced earnings to near zero on the P/E number.)

Today, P/E ratios are slightly elevated, but interest rates are near zero. So compared with history, today's level shows stocks are STILL not expensive based on this measure.

As you can see, stocks are a better deal today (in an environment of no inflation and low interest rates) than they were in 1980, when inflation and interest rates were in the double-digits.

The number 22 is the magic number for this indicator. When this indicator is less than 22, stocks return 12.3% over the next 12 months. But when it's more than 22... stocks fall over the next 12 months.

Today's reading is less than 19 – so we are not in a danger zone yet. And clearly we're nowhere near "bubble" valuations in U.S. stocks.

In short:

Rising interest rates won't kill the bull market in stocks, as I explained yesterday.

Stocks are not at bubble values, yet.

These conclusions might seem controversial... but they are simply based on the facts.

Yes, U.S. stocks have gone up for almost six years. But don't look backward... look ahead. And looking ahead at 2015, the U.S. is STILL an excellent place to put your money to work.

Don't let fear or emotions push you out of U.S. stocks. You want to own them in 2015!

Good investing,

Steve

P.S. If you want to know how I'm picking stocks in this market, join us for a completely FREE webinar later today. Although I recorded this webinar earlier this year, it still holds true today. In it, I share the strategy I've used to average 79% gains on 10 open positions in my True Wealth Systems newsletter. There's no need to sign up... simply go here anytime today between 2 p.m. and midnight Eastern. Don't miss out!

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2013 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in