Wednesday, August 15, 2012

PE ratio and S&P 500

There is no reason to believe that this time its different. There is no indication on this historical chart that there was ever a major bear market following a P/E5 move from below to above 13.40. Contrary to this evidence there are plenty of perma-bears (who do well for themselves collecting fund managing fees) who warn us with weekly missives of the imminent demise of the stock market.
However, the historic data based on P/E5 suggests that we are experiencing a new bull market which may continue for quite a few years, which is the same conclusion arrived from the trough formation of the 50- and 200-month moving average of the S&P, an entirely unrelated indicator.

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