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There are always signs of why the market can faulter as well as increase. I am & have been concerned that the market has been stretched with a P/E of 26 when the median is 16. Throw in the Fed wanting to increase rates which has potential to crimp corporate earnings hence making the market even more overvalued.
Without getting into too many variables with facts & figures thanks for the link
Jack Boogle is a smart guy who lives and breathes investments. His predictions may or may not come true but I certainly am not impressed with his analysis. In fact he seemed to shoot himself in the foot when he argued the case for continuing stock market and bond investments because there is nothing else.
The P/E argument is something that seems to come up constantly not just from Boogle but from a lot of know-nothing, talking heads. Sure a high P/E ratio could occur in an over heated stock market. That hardly seems the case at this time with instead very cautious investors. Overall the P/E is a very poor predictor of future stock market behavior. Everyone, including Boogle, seems to ignore the changes in P/E that occurred due to changes in accounting practices. Due to the changes, companies have lower overall taxable earnings. Unfortunately the effect varies greatly from company to company. Coming up with an overall number that reflects average changes in P/E is difficult. The analysis I have seen indicates that instead of 15-16 as the historical average, the new average should be about 19-20 based on the changes in accounting practices.
It seems clear that we have had some extremely good stock market performance over the past few years. It seems reasonable to expect that level of performance will cool down. Certainly this past year helps confirm that idea. Anything more specific seems to be just a guess.
I am & have been concerned that the market has been stretched with a P/E of 26 when the median is 16.
Current S&P 500 PE is 21.91. S&P 500 PE Ratio
In the last 20 years PE's don't get stretched until they get into the 30 to 40 range. If you believe in head a shoulder formations then 30 to 40 would make sense.
Here's a new negative- jobs report possibly giving Fed confidence to start the rate increasing process. That should cause some renewed volatility in the near term.
My personal thought it the unemployment rate is bunk- I think there are a ton of long term unemployed and underemployed Americans out there so the numbers are skewed. I think corporations are struggling to meet quarterly numbers and are relying on other means such as M&A/ Share repurchases & cap ex reductions to meet. Just my 2 cents but go ahead and raise rates.
they are likely just as skewed the other way too by those who are unemployed because today they are not employable and won't be .
many can't pass back ground checks , credit checks and drug testing which is more and more becoming part of the filter to see who gets employed .
that does not mean there aren't jobs , it means there are no jobs for them .
when i was working we were hiring like crazy for years and still are . but those who can even get to first base are few and far between and we have not even got to job skills yet . .
I don't disagree with your mentioning the unemployable but just in my small circle of friends etc. I know many that have education/ experience etc. that have decided on early retirement or are having issues from competition from younger and lower salaried individuals. Then I know some younger folks having issues because they lack the experience. I also feel the electronic hiring process is in all reality hindered quality applicants because they may be missing a key word in their resume or whatever.
We can discuss the issues of employment landscape all day long but my point is/was to expect increased volatility simply based on fed's willingness to increase rates and even though should be quite minor will cause a drag that the economy will need to be strong enough to absorb.
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