Published March 3, 2023
While the stock market broadly has struggled the past month, there are underlying signs of strength. This is not currently a stock market where all boats are rowing in the same direction. (more…)
price-earnings ratio
Markets Upended by Russian Action
Published March 4, 2022
Another week, and another twist in our market narrative. Investors are trying to parse so many crosscurrents, we can all be forgiven for not knowing which end is up these days. We are now 100% certain the Fed will raise interest rates at their March meeting. However, that once-possible 0.50% rate hike went out the window when Russian troops marched into Ukraine. (more…)
Returning to Normal
Published June 4, 2021
While there remain many places still struggling with Covid-19 and its myriad effects, the broad U.S. economy is, less and less, one of those places. This week, the Federal Reserve made clear they are ready to begin backing out of the unprecedented market supports they put in place a year ago. It will be a good while before the Fed takes any action on interest rates. For now, they are beginning to sell off the assets accumulated during the height of pandemic uncertainty. Those assets are the corporate bonds and ETFs purchased by the Central Bank last summer to shore up wavering market confidence. (more…)
Reminder: The Market Is All About Supply and Demand, Nothing Else
Published February 5, 2021
That’s right folks, any market: stocks, bonds, commodities, milk, diapers, et al. is ONLY about supply and demand. Sure, we try to make ourselves feel better by assigning formulas and trying to figure out some “fair value” based on historical data. But it’s a complete wild west guess, right? Take the price-earnings ratio, so frequently used to peg the stock market as being “expensive” or “cheap”. This ratio has run anywhere from 10 to 100, settling in a typical range of 15-20 or so. Still, it’s a bell(ish) curve with a very wide range of possible values. That typical range does not say anything about the investing or economic environment of the times. (more…)
Stock market seeks other drivers
Published July 17, 2020
A few miscellaneous notes this week that describe the current market outlook, foggy though it be. Starting at the highest level with the wide range of earnings projections for the S&P 500. Currently, the S&P 500 index trades around 3200. If we look at the chart below, we see a 2021 earnings per share for the S&P 500 range of $135-170. At $135, the S&P 500 is trading at price-earnings ratio of 23, on the high end of “normal”.