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1/ A quick glance at the valuations & R/R setup.
S&P has rallied back to 2800 level, while forward EPS is falling towards $160.
Has the market rallied too far too fast?
Could the earnings disappoint far beyond what Wall Street thinks?
What is the current risk to reward setup?
S&P has rallied back to 2800 level, while forward EPS is falling towards $160.
Has the market rallied too far too fast?
Could the earnings disappoint far beyond what Wall Street thinks?
What is the current risk to reward setup?
2/ The bull market had 3 important peaks, two which resulted in a major correction and the final one which ended the decade-long bull run.
The 1st came in mid-2015 @ 17X forward earnings.
The 2nd in early 2018 @ 18.5X and the recent peak in early 2020 @ 19X.
The 1st came in mid-2015 @ 17X forward earnings.
The 2nd in early 2018 @ 18.5X and the recent peak in early 2020 @ 19X.
3/ If you've made money over the last 3-4 weeks, well done to you.
Returns of 20-50% were up for grabs in different indices & different sectors.
Usually, one needs to stay invested for a period of 24 to 48 months to achieve those kinds of returns — not just 20 days.
Returns of 20-50% were up for grabs in different indices & different sectors.
Usually, one needs to stay invested for a period of 24 to 48 months to achieve those kinds of returns — not just 20 days.
4/ Having said that the S&P valuations are now approaching forward 17.5X as we go through a rebound rally.
If one assumes further upside towards, say 3,000, which is up only 7% from here... together with disappointing earnings...
S&P could easily be trading at 20X forward P/E!
If one assumes further upside towards, say 3,000, which is up only 7% from here... together with disappointing earnings...
S&P could easily be trading at 20X forward P/E!
5/ Either the market thinks (knows?) the economy is about to come roaring back & earnings will recover swiftly...
Or the current risk-reward setup is about as bad as it was in Jan/Feb of 2020 — when we decided to sell out of stocks & raise cash (thread below).
Pick your side.
Or the current risk-reward setup is about as bad as it was in Jan/Feb of 2020 — when we decided to sell out of stocks & raise cash (thread below).
Pick your side.
