Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Stocks Bull Market is Over

Stock-Markets / Stocks Bear Market Sep 24, 2015 - 02:02 PM GMT

By: Casey_Research

Stock-Markets

By Justin Spittler

Stocks had a horrible day Tuesday…

The S&P 500 lost 1.23%. The Dow Jones Industrial Average lost 1.09%.

Indices around the world also fell…


The Euro Stoxx 600, which tracks 600 of Europe’s biggest companies, lost 3.12%. Germany’s DAX lost 3.80%. Japan’s Nikkei 225 lost 1.96%.

•  Casey Report readers know this is part of our “script”…

The S&P 500 plunged into its first correction since 2011 on August 23. A correction is when an index falls 10% or more from its last high. In total, the S&P 500 plunged 11% in 6 days.

In the latest issue of The Casey Report, E.B. Tucker told his readers that this big drop marked the end of the 6-year bull market in U.S. stocks. He wrote:

We believe the era of asset prices soaring on a wave of easy credit is over. Last month’s major stock market decline is the start of a very tough time for stocks and the economy…

This bull market is unraveling because it was built on easy money. E.B. explains how the Federal Reserve’s easy money policy has propped up the price of almost everything.

The Fed’s easy money policy has lifted the price of just about every asset over the past six years. Cars, luxury watches, art, boats…just about everything that’s for sale costs more than it did a couple years ago. That’s especially true of the stock market.

The Fed cut its key interest rate to effectively zero during the last financial crisis. And it’s kept it there ever since. Low interest rates were supposed to boost the economy. But they’ve also pushed up the price of stocks and encouraged reckless borrowing, as E.B. explains:

By making enormous amounts of credit available, the Fed stoked the economy, stocks, and the housing market. Stocks tripled from their 2009 lows. Average U.S. home prices climbed 50% from their previous lows. Companies with poor credit ratings borrowed record amounts of money...far more than they did before the 2008 crisis.

E.B. went on to explain how high stock and home prices were masking a huge problem:

In 2015, the total net worth of American households reached $85 trillion, an all-time high. On the surface, things look good. But the long period of low interest rates has created an extremely dangerous situation…

By taking interest rates to zero and holding them there for nearly seven years and counting, the Fed has created bad investments and reckless speculation on an epic scale. Not billions...but trillions.

•  The crash last month pushed U.S. stocks below an important long-term trend line…

E.B. explains why this is such a big deal:

A long-term trend line shows the general direction the market is heading. Many professional traders use it to separate normal market gyrations from something bigger. Think of it as a “line in the sand.”

As you can see from the chart below, there have been a few “normal” selloffs since 2011. On Friday, August 21, however, the S&P dropped below its long-term trend line for the first time in about four years.

•  U.S. stocks rebounded after last month’s crash…

But E.B. told his readers the rebound was only temporary. He said the market was in the middle of a “dead cat bounce.”

E.B. thinks U.S stocks will keep falling, in part because they’re so expensive.

Right now, the S&P’s CAPE ratio is 24.6…about 48% more expensive than its average since 1881.

The S&P has only been more expensive a handful of times since 1881. That includes the years around the 1929, 2000, and 2007 market peaks.

CAPE is a popular valuation metric. It’s the price-to-earnings (P/E) ratio with one adjustment. Instead of using one year of earnings, it uses earnings from the past 10 years. This smooths out the effects of booms and recessions and provides a useful, long-term view of the market.

The chart below shows that the market eventually collapsed after the high-CAPE periods around the 1929, 2000 and 2007 market peaks:

•  The Fed’s easy money policies have fueled a reckless debt binge...

And debt acts like dynamite when a financial crisis hits.

We’re in a very fragile situation. E.B. thinks last month’s brutal selloff in U.S. stocks was just the beginning. Things are likely to get much worse from here. But they don’t have to get worse for you…

E.B. can be your “personal guide” as this 6-year bull market continues to unravel. He’s recently shown readers how to profit from crashing oil prices and the digital revolution in money. You can read all about E.B.’s favorite investing opportunities every month in The Casey Report

Right now we’ll send you a FREE 30-day subscription to The Casey Report when you order Going Global 2015…one of the most important books we’ve ever published. Going Global shows you how to move your wealth outside the “blast radius” of any financial crisis.

We usually sell Going Global for $99. But we’re virtually giving away a very limited number of hard copies…all we ask is that you pay $4.95 to cover our processing costs.

Why are we practically giving away so much of our best research? Because we hope that after trying what is essentially a free sample of some of our best and most valuable work, you’ll want to do business with us again.

Click here to claim your hardcover copy of Going Global 2015 and your FREE 30-day subscription to The Casey Report.

The article The Bull Market is Over was originally published at caseyresearch.com.
Casey Research Archive

© 2005-2022 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