The stock market is overvalued

[Bonerfarts]

The S&P 500 currently averages 24.59 Price/Earnings, the 10 year average is 28.10 Price/Earnings. With inflation leveling off and the fed stopping rate increases (possibly lowering on the horizon) anyone who is sure that the market is over priced, doesn't know what they are talking about.

 

[MitchLL]

The S&P 500 currently averages 24.59 Price/Earnings, the 10 year average is 28.10 Price/Earnings. With inflation leveling off and the fed stopping rate increases (possibly lowering on the horizon) anyone who ios sure that the market is over priced, doesn't know what they are talking about.

Agree.

2024 could be setting up to be a replayed 2023 in terms of % gain.

 

[hawkiniowacity]

I know there has been recent good news on earnings and GDP and etcetra, but the S&P 500 in my opinion is way overvalued. The Fed has indicated more rate increases are in order. The effect of past increases is delayed. I see a recession happening in the next 6 months. The market has had its best half year in many years. Time to short the market. And I did in a big way today. Perhaps too early in the day, but we shall see. I may go broke or get rich(er). I make mistakes all the time. I took profits on TSLA in the 170s and it kept going up. It's all fun.

What are your views on the market?

That was a hell of a recession the last 6 months......

And this is why I laugh at most of these threads. Some of us work in this industry, it's quite easy for us to spot those that don't.

 

[MitchLL]

From my view, the strength of the job market the last three years was always going to make the doom and gloom predictions inaccurate.

 

[noleclone2]

Those Trump tax cuts finally kicking in baby!

 

[HawkeyeHitman]

I love the 25 stocks that I own. They will keep doing great things as long as the United States government isn’t controlled by worthless Marxist leeches.

 

[MitchLL]

I love the 25 stocks that I own. They will keep doing great things as long as the United States government isn’t controlled by worthless Marxist leeches.

Just can't bring yourself to think objectively.

Definitely a "you" problem.

 

[Viv_Savage]

I'm glad everyone is taking victory laps. Selling puts and buying calls on indexes while selling the underlying is surely sustainable.

For those "in the biz", how do you explain the VIX down at 12 while realized volatility is much higher? I'm genuinely curious.

Lastly, with the lagging effect of Fed rates going up leading to a recession in the past, what makes you think this time will be different? Again, genuinely curious. Is it simply with the amount of money printed, it has nowhere else to go but 7 stocks?

FWIW, 7 stocks are hovering around 30% of the S&P 500, what happens if they start to have worse earnings? NVDA is currently pricing in something like 8 years of growth into its current price and just had its biggest customer cut out (China) by the Biden administration.

I want to believe everything is great, I just don't see it. I'm staying in bonds, you do you.

 

[Gonolz]

That was a hell of a recession the last 6 months......

And this is why I laugh at most of these threads. Some of us work in this industry, it's quite easy for us to spot those that don't.

 

[Bonerfarts]

I'm glad everyone is taking victory laps. Selling puts and buying calls on indexes while selling the underlying is surely sustainable.

For those "in the biz", how do you explain the VIX down at 12 while realized volatility is much higher? I'm genuinely curious.

Lastly, with the lagging effect of Fed rates going up leading to a recession in the past, what makes you think this time will be different? Again, genuinely curious. Is it simply with the amount of money printed, it has nowhere else to go but 7 stocks?

FWIW, 7 stocks are hovering around 30% of the S&P 500, what happens if they start to have worse earnings? NVDA is currently pricing in something like 8 years of growth into its current price and just had its biggest customer cut out (China) by the Biden administration.

I want to believe everything is great, I just don't see it. I'm staying in bonds, you do you.

Good points, no one knows for certain what will happen. Even if there is a recession, does that mean stocks will go down? Would it cause the fed to cut rates again? Where else would you want to put your money besides US businesses?

 

[MitchLL]

Looks like we might be in for the mostly usual "Santa Claus" rally!!!!

Things are looking up.

 

[Viv_Savage]

Good points, no one knows for certain what will happen. Even if there is a recession, does that mean stocks will go down? Would it cause the fed to cut rates again? Where else would you want to put your money besides US businesses?

Risk free 5% returns work for me.

 

[desihawk]

Good points, no one knows for certain what will happen. Even if there is a recession, does that mean stocks will go down? Would it cause the fed to cut rates again? Where else would you want to put your money besides US businesses?

the bolded part pretty much sets a nice floor. if not usa who? it’s not china, eu has potential but not ready yet.

 

[globalhawk]

Risk free 5% returns work for me.

You are apparently happy with leaving money on the table.

 

[TC Nole OX]

 

[WadeLookingbill]

View embedded media

Interesting observations in that link. He sure is bearish on bonds.

 

[Hawk_82]

Interesting day in the stock market today. S&P hit resistance near all time highs. We had a pull back of 1.5% (in the last 2 hours of the day) with the VIX rising 9.3%. It looks like we have a double top on the S&P 1D.

I am assuming we will have low momentum over the next 2 weeks and will likely retest the all time high. I am guessing we may be stagnant to slightly positive over the next week but will be heading down by mid January.

Do you think we will surpass all-time highs or is this the start of a huge bearish trend? The all time high on S&P was reached on Jan 4, 2022 which started the decline down to a recent low on Oct 13, 2022. Even if we continue in a bear market, I could see a 10% pullback coming at the beginning of 2024 with a potential for 25%+ loss.

 

[Viv_Savage]

This isn't sustainable. No one is buying the underlying. Look at the amount of puts sold since October. There were so many sold puts, it appears the market maker was net long puts and when the market maker dumps their hedge, look out below.

 

[Here_4_a_Day]

Bitcoin and the companies that support its infrastructure.

 

[nolesincebirth]

As long as the fed continues with easy money / low rates, this thing will rip higher. It’s 100% artificial but that doesn’t mean it’s going to stop. Eventually it will and it will be ugly. But in the meantime, stocks only go up!

 

[cfbfan23]

As long as the fed continues with easy money / low rates, this thing will rip higher. It’s 100% artificial but that doesn’t mean it’s going to stop. Eventually it will and it will be ugly. But in the meantime, stocks only go up!

Fed Funds rate is 5.5% currently.

What is your idea of a low Fed Funds Rate?

 

[Here_4_a_Day]

Also, if you haven't already done so, it's time to shift part of your portfolio into uranium--stocks and/or ETFs. The fundamentals here are absolutely staggering, and though the investments have yielded nice YTD returns, they haven't kept up to the move up in the underlying mineral which traded over $90 last night for the first time since 2007 > https://www.investing.com/commodities/uranium-futures

Here's my fav ETF, up 41% YTD despite a small pullback this week > https://www.cnbc.com/quotes/URA

 

[An Iowa fan]

This isn't sustainable. No one is buying the underlying. Look at the amount of puts sold since October. There were so many sold puts, it appears the market maker was net long puts and when the market maker dumps their hedge, look out below.

Elliott Wave and Index Trends with POKERSAM Message Board - Msg: 34514100

www.siliconinvestor.com

This guy agrees with you. He is one of the best Elliot Wave analysts
that I know. We used to exchange info and ideas for years. We had a falling out a few years ago. He is a stubborn rascal. I still keep track of what he is thinking.

I disagree right now with his total bearishness. We made it back to the highs like I thought but I did think we were going lower than we did. We should now venture down to around 3600 on the SPX and hold. If we break out the top with power I am wrong.

The $INDU has a much cleaner chart for the last three years.

 

[Bonerfarts]

There is a lot of money on the sidelines still. Good luck shorting this market.

Private-equity firms build up record $2.59 trillion in 'dry powder,' or capital on the sidelines

www.morningstar.com

 

[nolesincebirth]

Fed Funds rate is 5.5% currently.

What is your idea of a low Fed Funds Rate?

Historically speaking, that’s still relatively low. It’s right at the historical average and the fed is already talking about cuts next year.

 

[noleclone2]

This isn't sustainable. No one is buying the underlying. Look at the amount of puts sold since October. There were so many sold puts, it appears the market maker was net long puts and when the market maker dumps their hedge, look out below.

Not sure I understand this. From my perspective, the markets have been in the doldrums overall since February 2020 and lost money last two years. Not sure a rebound in late 2023 is something artificial or unsustainable after 3 plus years of bearish market. Especially given all the positive economic numbers. It feels like it has not even caught up to where it should be.

 

[Here_4_a_Day]

There is a lot of money on the sidelines still. Good luck shorting this market.

Private-equity firms build up record $2.59 trillion in 'dry powder,' or capital on the sidelines

www.morningstar.com

Shorting is a fool's errand. There's soooo many other ways to make money in 2023 without that risk.

 

[Formerly Rockymtnole]

As long as the fed continues with easy money / low rates, this thing will rip higher. It’s 100% artificial but that doesn’t mean it’s going to stop. Eventually it will and it will be ugly. But in the meantime, stocks only go up!

Last year I consolidated some accounts and had a lot in cash waiting for the right time to put it back in. Missed the first few days of the big run in November.

Not doing that again. I’m in it for the long haul.

 

[franklinman]

Buy low; sell high.

Honestly, I just do dollar-cost-averaging and don't worry about the market. And those dividends coming in doesn't hurt.

yep, and i'm still holding stocks i bought back in the 80s, don't need the money so why sell. and i really like the dividend $$$s.

 

[nolesincebirth]

Last year I consolidated some accounts and had a lot in cash waiting for the right time to put it back in. Missed the first few days of the big run in November.

Not doing that again. I’m in it for the long haul.

I made the same mistake. 🤦‍♂️

 

[onlyTheObvious]

I hope it finishes strong. Just like a warm fuzzy. My 401k was up 26.9% YTD a couple days ago.

 

[cfbfan23]

Historically speaking, that’s still low.

Looking at monthly ff-rates going back to 1954, the average rate is 4.6%. Current FFR is 90 bps above the historical average.

When you look at the December FF-rates going back to 1954, the average rate is 4.65%. Current FFR is 85bps above historical average.

 

[nolesincebirth]

Looking at monthly ff-rates going back to 1954, the average rate is 4.6%. Current FFR is 90 bps above the historical average.

When you look at the December FF-rates going back to 1954, the average rate is 4.65%. Current FFR is 85bps above historical average.

From 1971 to 2023, the average is 5.42 percent.

I said it’s “right at the historical average.” But ok, you got me. We’re 0.08 over the average. Mea culpa.

 

[cfbfan23]

From 1971 to 2023, the average is 5.42 percent.

I said it’s “right at the historical average.” But ok, you got me. We’re 0.08 over the average. Mea culpa.

Why pick 1971 as the starting point? Why not 1991?

 

[nolesincebirth]

Why pick 1971 as the starting point? Why not 1991?

End of gold standard.

 

[cfbfan23]

From 1971 to 2023, the average is 5.42 percent.

I said it’s “right at the historical average.” But ok, you got me. We’re 0.08 over the average. Mea culpa.

You also said that historically-speaking, it's low. Compared to the smaller sample size of the 70's and 80's, yes.

Compared to the larger sample size of the 90's, 00's, 10's and 20's (so far), it's not.

I probably agree with you on most things other than saying it's currently an environment of easy-money and that 5.5% is a low rate, historically-speaking. If the Fed does make those "anticipated" cuts, then we most certainly will be in the environment of which you speak. I'm in the camp that the market is mis-interpreting the Fed. I think rates will be higher for longer, or at least until the unemployment rate goes up significantly. Which may happen sooner than we think. There's still some sticky inflation, too (although it's coming down.

 

[nolesincebirth]

You also said that historically-speaking, it's low. Compared to the smaller sample size of the 70's and 80's, yes.

Compared to the larger sample size of the 90's, 00's, 10's and 20's (so far), it's not.

I probably agree with you on most things other than saying it's currently an environment of easy-money and that 5.5% is a low rate, historically-speaking. If the Fed does make those "anticipated" cuts, then we most certainly will be in the environment of which you speak. I'm in the camp that the market is mis-interpreting the Fed. I think rates will be higher for longer, or at least until the unemployment rate goes up significantly. Which may happen sooner than we think. There's still some sticky inflation, too (although it's coming down.

Fair enough. But I’m of the mindset that this entire market since 2009 has been inflated and propped up by the fed.

 

[cfbfan23]

Fair enough. But I’m of the mindset that this entire market since 2009 has been inflated and propped up by the fed.

I totally agree. I also understand why they did it......financial crisis followed by COVID. Low-interest rates are a drug and a means to kick the can down the road. It's hard not to chase that dragon.

Our household has certainly taken advantage of the low rates, buying properties, but the rates never seemed realistic to me (not that I'm complaining). It was a buying opportunity of a lifetime.

To me, a mortgage rate on a primary house should be at least 6% (up to 8 or 9%).

 

[Bonerfarts]

Fair enough. But I’m of the mindset that this entire market since 2009 has been inflated and propped up by the fed.

I'm not so sure. Just looking at the average Price to Earnings ratio for the past decades, seems like we are in line and maybe slightly high:

1980s:

• Average P/E ratio: 17.2x
  • P/E peaked at 25x in 1987 before the Black Monday crash

1990s:

• Average P/E ratio: 24.5x
  • The P/E skyrocketed to 44x during the dot-com bubble in the late 1990s, reflecting exuberant investor expectations for tech companies.

2000s:

• Average P/E ratio: 18.1x
• Notable trends:
  • The early 2000s saw a decline in P/E due to the dot-com bust and the 9/11 attacks.

2010s:

• Average P/E ratio: 19.5x

2020s (so far):

• Average P/E ratio: 21.3x (as of December 2023)
• Notable trends:
  • The COVID-19 pandemic initially caused a spike in volatility and a dip in P/E

 

[MitchLL]

As interest rates drop next year, $$$ will be shifted to stocks.

Any investor in it for the long haul will put their assets into the higher potential areas.

The trend is higher and should continue.