The stock market's price level is well above where it was pre-pandemic, it's trading at earnings multiples in-line with 30+ year averages [1] (what was the 10Y yield in 1990, might I ask?) because earnings have gone up.
I know being doom and gloom makes you sound smart (to some), but don't fall into the trap of 'everything is shit now because inflation has been high for 20 months'
And what about all the companies that still have billion dollar market caps but have NEGATIVE earnings? (Atlassian, Snowflake, Uber, Crowdstrike, Shopify.... the list goes on)
Folks we are in a tightening cycle in order to fight inflation. It's feels important to remind everyone that economic conditions like this have not happened in decades. This site (hackernews) has pretty much entirely existed in the era of cheap money and low interest rates.
Keep your head in the sand at your own peril.
Companies are tightening their belts and you should too.
I think they are an extremely small part of the $100tn global stock market that people here love talking about because they work there.
>Folks we are in a tightening cycle in order to fight inflation.
My point was that we are at multiples in-line with 1990, ya know when we had 8% 10Y yields.
Folks, call the end of the world at your own peril.
Is any part of you worried the S&P is headed 3600 -> 3500 -> 3200 -> 3000 -> 2800 given the current climate? I'm worried that the current P/E ratio (from EPS TTM, past 4 quarters) might be a bit "rosy", and the next 4 quarters of earnings are over-optimistically priced (not enough pain has been factored in/the effects of corporations having to try to grow for 18 months in a 4% interest rate environment hasn't been priced in yet).
If you check https://www.spglobal.com/spdji/en/documents/additional-mater... and https://www.yardeni.com/pub/yriearningsforecast.pdf, analysts are forecasting 8-9% earnings growth 2022 -> 2023.
That means if we don't hit those numbers, the market will have to reprice itself, no?
Additionally, if the entire world stock market is $100tn, the US is sitting pretty, because at $49tn the US stock markets represent HALF of the entire world stock market.
Where do you propose to store wealth if it is all coming down?
Here's someone else who called it over a year ago with some charts with counterpoint those you link:
https://www.hussmanfunds.com/comment/mc220925/
OR CAPE: https://www.multpl.com/shiller-pe
Note he's in good company, with Jeremy Grantham for example also warning of the same thing:
https://www.livewiremarkets.com/wires/grantham-this-is-a-bub...
Just to be clear, the argument is not 'everything is shit now because inflation', it is that the era of easy money has ended, significant inflation and war means a regime change in central bank intervention, and central banks will now tighten till things break. They haven't even managed to unwind QE yet and stop buying their own debt, will they ever? If they do, watch out.
This isn't doom and gloom, it's simple realism about the regime change in interest rates - the era of 0% money is gone, in its place we have a normalisation, which means a normalisation of frothy asset prices and a reversion to the mean of earnings and prices in many domains. Usually these things take a year or two to work out, it won't be a fast process.
When that changes, I think you’ll see earnings rise as chasing growth now carries a higher cost.
Citation needed. Maybe we are enter a local minimum, but what, you think off-stock-market value is not going to be brought onto the stock market?
I think you should try to raise a private capital fund and roll-up as many mom and pop retailers as you can, then.
Usually, they cite things like artificially low input costs (hard to argue that today), unsustainable demand from customers due to 'cheap money' (haven't seen evidence of that yet, the opposite actually), and a general disdain for advertising and retail business models (despite their long-term durability).
1) 'Inflation adjust' asset prices (if you think the average stock-holder has anywhere near the spend patterns of the CPI basket, boy howdy do I have something to tell you about home ownership and income inequality: rent is 33% of the CPI bucket and that's an 'imputed cost' for the vast majority of stock-holders who own their homes)
2) Think 7.5% in 2 years is a 'bad return'
EDIT: Let's actually play a fun game, what's the real return of the SPY from the perspective of someone planning on taking a trip to Europe/The UK/Japan?
Nope. Only a few percent above and trending sharply downward:
What a needlessly condescending reply
I just think P/E by itself is way too oversimplified and a pretty garbage metric when used in aggregate + historically due to things like interest rates, sector/business model skew, relative maturity of companies, etc also fluctuating over time. It’s like Week1 of value investing 101, not an actual metric by which you’d want to engage in value investing or historical analysis.
