Investment U argues the impressive bull run in the stock markets is in line with history and is not necessarily due for a correction.
A couple of reasons that stood out for me:
•Valuation: Despite the impressive run-up, stocks aren’t grossly overvalued. The S&P 500 trades at a price-to-earnings ratio of 15.7. The long-term average is 15.4 since 1930. Stocks aren’t expensive on a price-to-book ratio (P/B), either. They currently trade at a P/B of 2.2 times, compared to a long-term average of 2.44.
•Presidential Cycles: The S&P 500 has never declined during year three of the presidential cycle. Instead, it rallies by an average of 17%. So with extra emphasis, we’re thankfully in year three of President Obama’s term.
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