Not exact matches
The Market Climate remains on a Crash Warning, characterized by extremely unfavorable
valuations, unfavorable trend uniformity, and hostile yield trends, particularly long - term bond yields and
various measures of risk premiums.
Wall Street analysts love to
measure the stock market based on
various price metrics, performance metrics and
valuation metrics.
As usual, I don't place too much emphasis on this sort of forecast, but to the extent that I make any comments at all about the outlook for 2006, the bottom line is this: 1) we can't rule out modest potential for stock appreciation, which would require the maintenance or expansion of already high price / peak earnings multiples; 2) we also should recognize an uncomfortably large potential for market losses, particularly given that the current bull market has now outlived the median and average bull, yet at higher
valuations than most bulls have achieved, a flat yield curve with rising interest rate pressures, an extended period of internal divergence as
measured by breadth and other market action, and complacency at best and excessive bullishness at worst, as
measured by
various sentiment indicators; 3) there is a moderate but still not compelling risk of an oncoming recession, which would become more of a factor if we observe a substantial widening of credit spreads and weakness in the ISM Purchasing Managers Index in the months ahead, and; 4) there remains substantial potential for U.S. dollar weakness coupled with «unexpectedly» persistent inflation pressures, particularly if we do observe economic weakness.
As of last week, the Market Climate for stocks was mixed -
valuations remain unfavorable, technical action was mixed but tenuous, with
various indices flirting with widely observed levels of support and resistance (e.g. the 1100 level on the S&P 500), while leading
measures of economic activity remain decidedly unfavorable.
Now we demonstrate the robustness of our findings by broadening the study to include new factors and strategies, consider
various forecast horizons, and use alternative
valuation measures.
Value Stocks: Stocks that appear to be trading at a discount to their intrinsic worth, as
measured by
various different
valuation metrics.
In the context of your series on
valuation metrics and equity expected returns, I'd be interested in your thoughts on our meta - study of market expected returns using
various smoothed PE ratios, the Q ratio, mkt cap / GNP and regression to trend
measures.