Understanding The "Elevated Risk" Concept

I have been saying for some time now that the stock market is not a low risk proposition at this stage of the game. There are several reasons for taking this stance, but Exhibit A in this argument is the state of stock market valuations. So, this morning, I'd like to review some hard, cold data on the subject - in order to make sure that we are all "seeing" this picture clearly.

The first point on this fine Wednesday morning is that, on an absolute basis, stocks are extremely overvalued. And since a picture is often worth/better than 1,000 words, below are four charts that make this case clear.

The first is the Price-to-Earnings ratio for the NYSE Composite using the median stock to do the calculation. This chart goes back to 1980.


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As you can see, the median stock on the NYSE is currently valued at one of the highest levels seen in the last 37 years.

Next up is the Price-to-Sales ratio for the S&P 500...


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I'm not sure there is much more that needs to be said here as the only time stocks were more overvalued since 1955 was during the technology bubble period.

Now let's turn to the Price-to-Cash Flow Ratio...


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This appears to be the same story. With the exception of the tech bubble, stocks have never been more overvalued when compared to the cash generated by the companies that make up the S&P 500.

And finally, let's look at the median P/E for the S&P 500...


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While this chart is not as dramatic as the last two, the point is that with the exception of the tech bubble period, valuations have never been higher.

However ...

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About That Negative Seasonality Thing...

By now, everyone probably knows that September tends to be "the cruelest month." Since 1928, history shows that September's return is by far the worst of the year, with the month averaging a loss of -1.1%. And the ...

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The Daily Decision for 9.18.17

TODAY'S PORTFOLIO REVIEW:

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If History Is Our Guide, Harvey Will Cause Stocks To...

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The Daily Decision for 8.29.17


The Early Take on the Market:
Please accept my apologies for the tardiness of this week's report. We had traveled to Chicagoland for family gatherings over the weekend and I awoke Monday morning to no internet where we were ...

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Indicators Suggest Some Caution Still Warranted

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The Daily Decision for 8.25.17


The Early Take on the Market:
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