Here is my number one question:
“What justifies the S&P 500 P/E ratio being 44% above its historic mean?”
Seems like a reasonable question. In this week’s update, I venture into a little bit of fundamental analysis. Weird, I know, for a technical analyst. But sometimes we have to venture to the dark side, if only briefly.
Watch this week’s video and let me know what you think!
I have felt that a lot of the rally is not warranted but the only reason I can figure is that there is nowhere else to put money and get any return on it. I think the historic low interest rates are driving it and it doesn’t sound like the Fed will change that anytime soon.
To quote Alan Greenspan, there seems to be some “irrational exuberance” in the market, causing excessively high valuations. One issue is that interest rates are at historical lows, so the stock market is the only place to get decent yields, therefore money has rotated out of low yield instruments, such as bonds, and into the stock market.