Good morning. The market took a breather yesterday. Stocks and rates were stable. Unhedged does not expect the calm to last. Email me: robert.armstrong@ft.com.Here is a chart of the forward price/earnings ratio of the S&P 500 since before the crisis. You will notice that, on this metric, the market became 20 per cent cheaper during this year’s sell-off. The market P/E has gone from 22 to 18 .
The decline in valuation we have seen has been unevenly distributed. Looking over the companies in the S&P 500 that have had the largest decline on their P/E ratios this year, the list is dominated by cyclical companies which are following their normal late-cycle pattern, and tech companies which are giving back some of their wild pandemic appreciation. Investors still face high valuations, by historical standards, in sectors such as retail and consumer goods.
And is peak fear consistent with a 4 per cent loss in a single day? It seems there were some reserves of positive sentiment left to be drained when the CPI number hit on Tuesday morning.
The stocks are cheap, the money has just been temporarily removed until the Fed decides if it will move rates.
TINA and everybody believes the Fed will eventually pivot so there is a constant FOMO bid. Fed needs to crash the market really to restore credibility. Maybe after the congress trading ban?
Not too much further - 15% and then they’re cheap
We need another 30% down at least lol
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