I guess it is a good time to be a retiree living off investments.
Wall Street is loving the CV19 rebound and loose money policies of government & central banks. The S&P 500 is now up an amazing 83% since last year’s CV19 low point on March 23rd, 2020. Globally, stocks are at an all time high.
Still, forgive me if I’m more than a little skeptical as all of the money being thrown around was ‘magically created’ by central banks. Almost 25% of our national debt (since the start of the country 230+ years ago) was created out of thin air in the last 12 months.
The Schiller PE index for the S&P 500 – shown above – now tops 36. That’s about 2x its historical average. The only time the market’s valuation has been this high was right before the dot com bubble burst 20 years ago.
I know the ‘experts’ explain the current exuberance with all kinds of logical-sounding reasons, but I’m still nervous. I thought the market was too high before the pandemic started, when the Shiller was at 27.
No, I haven’t made a wholesale move in our portfolio. We’re long-term investors and have a nice cash cushion to get beyond a downturn. Still, until corporate profits begin to deliver on these very high stock multiples, I’m not going to be surprised by a very big correction.
Sorry for the negative outlook amid the exuberance!
Image Credit: Multipl.com