Up 20% since the October 2022 low. It's been a slow steady climb and honestly I wasn't aware we were close to being in bull territory.
S&P 500 officially in a bull market
- Thread starter dorndawg
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What do you make of the high P/E ratio of the sp 500? I don’t understand this Bull(S).
It surprised me as well. Seems like just yesterday we were arguing in here about recessionary indicators. As with all markets I predict it will change. You can save my post for posterity and see if I’m right.***
I have trouble calling it a bull when it hasn’t moved significantly above the prior all time high.
I know this thread is about the S&P, but the Dow’s 34k magic ceiling over the last 6 months has been frustrating
I was pretty close to making a Tesla call when it was at 170. Had an obvious bull flag. Oh well.
Only if we are at the very end of the run. Sell at the peak and buy in the valley. Easy***
srsly, I always found Buffet’s advice about getting in when others are getting out to be sound but also, rich guy advice. What he meant was push in liquidity in those buying opportunities. When he’s long, he may adjust but he isn’t moving all of his money around all the time. He has cash to invest that most of us couldn’t fathom so he stays in markets and then pushes even more cash in during relative lows. Most of us don’t have those resources, and many of us have enough of our nest egg in stocks that the market makes us nervous. Buffet is so rich he just sees everything as an opportunity
It never feels like it, but we had a massive correction in in the excessive valuations. We actually pulled all the way back and even broke below the bull market trend line that began in 2009. See here:
So in theory we took all the fluff out of the market and have really just gotten back on track to the Post GFC world. A bull market driven by big tech, low interest rates, and an idea that fiscal and monetary policy makers will not let the market fail.
If you look at it this way, it might make more sense. If the market grinds along the current trend line, it wouldn't set an actual new high until July of 2027. It doesn't usually grind a long, but instead bounces of the trend an comes back down, but unless we are starting an AI infused super bubble, it will probably be another few years until we meaningfully set a new high on the S&P.
Going forward the biggest risks to this maintaining the trend are an uglier than expected recession or high/sticky inflation that keeps Fed Funds rates above 5% long term.
I personally think the recession won't be much of anything for consumers. Ask yourself how bad are you hurting? Compare it to 08' or 09'. This is very much a "things are bad out there, but I am fine situation" so far.
As for inflation, it's toast and has been for a while. As I have bìtched about ad nauseam, CPI is a terrible lagging indicator. It's especially terrible tracking housing in a timely manner. In the last CPI report, housing (shelter)shows it is up 8.1% YOY. And housing makes up almost 37% of the CPI weight. Because of how CPI depends on antiquated surveys, housing data lags by 12-16 months in CPI. As we all know housing (rents) is not up at all 2023 over 2022. It's actually flat to down slightly nationally.
So for the shelter component of inflation. Much like it was so slow on the way up, CPI is the same on the way down. If we agree it's actually flat real time instead of up 8.1% and based on the 37% CPI weighting of shelter in CPI, it's fair to say inflation could actually be at the target of 2%. (8.1*.37=2.997... April CPI 4.9% - 3% = 1.9%) A good real time inflation tool is truflation. Much less lag than CPI.
Click here to check out truflation
Since the Fed has to capture it, they can't just change the formula now. But yes inflation is toast. The only real pain is for people who sat on the sidelines in home buying the summer of 2020-2022 waiting for home prices to fall. That's tough, especially the ones who sold homes to cash out and jump back in later. Rates have murdered those folks, but luckily it's a small percentage.
So see @Boom Boom I am not an inflationista. I am a follower of accurate data. When free money through stimulus, low rates, PPP, forbearance etc dried up, so has excess demand. We aren't building more houses, we don't have a glut of used cars, and beef production is actually down 6% in 2023... Yet rents are flat, used car prices have moderated, and ground beef is on sale for $3.59/lbs every week vs $5.99 last year.
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Since you mention home buyers. We have land that we are wanting to build on one day and we have our house plans, but were just waiting out all of the craziness going on the last few years before pulling the trigger on building. Obviously we would like to sell high and build low but is any forecast as to what the housing and construction market will be doing in the upcoming year or so? Is now as good a time as any to sell and build? I'm not a market studier. We just don't want to end up upside down selling at a low time and building high
I can't even arrange the letters in the OP to spell "All is good....BS". It's always interesting to see what people infer from what is absolutely not there on posts.
Don’t forget the student loan pause. There has been a pause for years now. Payments start up again next month I think. There are a lot of people who have gotten used to having that extra cash that won’t have it now. There will be a return to reality for those who didn’t take that opportunity to pay off their debt.
Isn’t the fluff back in the market now?
S&P 500 PE Ratio - Multpl
S&P 500 PE Ratio chart, historic, and current data. Current S&P 500 PE Ratio is 29.27, a change of +0.25 from previous market close.
www.multpl.com
Sp 500 has higher P/E ratios now especially if you factor in the Schiller/inflation and stock price of the AI and tech stocks back up again relative to earnings. It just seems overpriced to me but I am usually wrong.
A person's primary home is not an investment. So I never look at based on high/low. I look at it based on affordability and desire. Can you sell your existing house today, use the proceeds to help fund your new build, and comfortably afford the mortgage payment? Are your pants on fire ready to build the new house? If so go for it.
If interest rates lower in the next year or two, you will be able to refinance. If the market goes up or down, you will ride it either way. I always use this analogy. The housing market is a carousel that never stops. Once you are on you can move safely from horse to horse (house to house) and the only people who get hurt are the ones who are jumping off or jumping on. So just don't sell and wait. It's too risky.
So to answer your question, if you can afford the home you want to build, go for it. If you would have to make comprises on important things to afford it, wait and save more money. There is a lot of pent up buy/sell demand right now. When interest rates drop below 5.5-6% it's going to get goofy for a while. If that happens it's going to be a lot harder to get good labor vs a slower time.
It never gets cheaper than today to build a house. Every 3 years new codes come out that drive up the cost to build. Labor gets more scarce and more expensive every year. Materials get more expensive. (Commodities like lumber go up and down, but they represent 8-10% of your cost to build, labor is 50% and HVAC doesn't get cheaper, it goes up like clockwork.)
Me every time I see a PooPops financial investment post with lots of graphs and lines. Looks legit to me- Ill have whatever he is having!
Do you still think we need a mild recession soon? I do, or else when it does crash it’s gonna be a big un.
Most people tend to pay more attention to forward earnings. Many S&P companies had significant cost cuts from layoffs and office downsizing that won't be realized until he next few quarters.
Forward earnings have us at a 18ish PE on the S&P. So yes, a lot of the fluff has been taken out unless earnings collapse from here all of a sudden.
I've taken the same bath as everyone else. Much better at drawing lines and making strong fact supported arguments than actually making money.***
Me every time I see a PooPops financial investment post with lots of graphs and lines. Looks legit to me- Ill have whatever he is having!
I don't know if I'd call it hurting, but we are significantly worse off than we were before inflation took off and I would assume we're not uncommon. We would have needed to increase our pay by over 13.5% over the past 24 months to keep up with inflation and 18% over the past 36 months and we unfortunately haven't come close. We're probably extreme in how poorly we've done, but I don't feel like most people that have climbed up the ladder much have been getting 5.75% annual pay raises the last three years (which is what you'd need just to keep up with inflation). I think the the lower end of the payscale have mostly gotten pretty big raises, but not sure they've been enough to make them better off. And I feel like most salaried people have been steadily losing ground, getting 3 or 4% pay raises. That's enough for a 5-7% income drop in real terms. Not that that's going to cause a crash or anything, but with so many consuming at the limits of their earning, I feel like that's a significant enough hit to cause a real recession.
I think people (including me) are going to ***** about inflation until they are able to get their income in real terms back to where it was in 2019/2020. And for a lot of people that won't change jobs, that's going to require inflation to be sub 2%.
It will hit college graduates with an average of about $350/month in extra expenses. I don't think it will move the needle for homeowners who locked in 30 year mortgages prior to 2022. But any already stretched thin with higher rents or trying to save to buy a house will feel it for sure.
At this point the only scary thing out there for me is regional bank failures from commercial real estate collapsing. I don't see it happening though. They weren't writing bad loans. Government shutdowns accelerated work from home by at least a decade. For all the bailouts we have had over the years, it would be a travesty if we let regional banks fail because governments sent office workers hone during COVID and businesses learned they don't need all that expensive office space.
I believe you are correct in raises not even keeping up with inflation. It seems companies are not able to reconcile anything past what they "normally" do, and we've kicked the inflation can down the road for so long, they aren't properly adjusting. It'll be interesting to see how/if adjustments eventually get made. If they don't, we could be staring at a long time for knowledge/white collar workers to be behind the curve on earnings; something that unskilled labor has seen for quite a while.
I am a amateur at this, but....
One of the good things about what is happening in the SP500 is that it is generally being supported by a few big time tech stocks. The rest of the index hasn't been producing like Tesla, Microsoft, Apple, and NVidia. Those tech stocks have taken a larger overall portion of the index, which is great but when the rest of the market starts to pick up and move forward there are lots of gains to be captured, which I believe is coming if the Fed holds off on rate hikes this next cycle, which is looking more and more like it considering the first time jobless claims report earlier this week.
Now the bad side is this, with the high PE on the techs basically being all the gains in the market, if investors start to bail on those, the S+P will drop.
Right now, in my opinion, the overall economy is humming at the moment and these other stocks are going to reflect that eventually. But as you know this can all change in a heartbeat. The only thing I know for certain, buying a **** ton of stocks at the end of last December is going to be awesome for me long term. Don't invest for today's gains, invest for the gains over the next 2 decades.
I agree, but the alternative to the spending money spree the democrat congress passed and Trump signed was a complete collapse of our entire economy, which would have been worse.
The big inflation finally hit the economy last Jan-June in real terms. That is now baked into the cake as you know. If you didn't get the pay raise while it was happening, the ability to get it now only expands the cost of goods and services across the board. Lay offs coming from the tightening of lending is going to help correct that. Sounds terrible, but some are going to have to feel some pain for inflation to yield.
Last I will say on inflation is this. I am in the building/construction industry. Prices of materials have come back down to earth, but contractors are as busy as they have ever been driving the price of construction through the roof. Add to that the bath they took in 2021 in particular due to contracts requiring they purchase materials at the height of cost increases, and contractors are not looking to do any work for a reasonable profit margin anymore.
ESSER money has all been spent now. That clears up most mechanical work that has been clogging up the works. I see the construction cost for new work coming back into reality in the upcoming year. When we get past the ARPA money, it definitely will.
ESSER money has all been spent now. That clears up most mechanical work that has been clogging up the works. I see the construction cost for new work coming back into reality in the upcoming year. When we get past the ARPA money, it definitely will.
No raises are going to keep up with a 10% inflation, and if they did that inflation would extend for a much longer period of time. With the fed tightening the belt, new money into the system will be reduced and essentially take the extra 2 trillion out of the market over time. But it will take time.
We need a recession so that people will
start working. If that doesn’t make sense, then look at our national employment data. Force the boomers out of retirement. Force the teenagers/college students to get off ***. And, perhaps, most importantly, force the welfare kings and queens to work by not indexing payments to inflation or another formula that continues to give raises.
This is going to hurt a bunch of people. Again, I am about as liberal as they come, but even I understand that people took out loans and they should be the ones to pay it back, without help from any other tax payer.
I feel bad for them, but they had 3 years to get up on those loans and get them cleared. The absolute first thing I did when COVID started was make my last payment on my loans. Took me 15 years but I cleared them.
Boomers need to just go away. We don't need them back in the workforce. The faster they get off the books as they say the better.
Supply has come back in line too. Foolish to just look at demand.
Beef production is predicted to stay down (due to cut backs at the heights of price shocks and lag yet to hit supply from those cut backs, gotta actually raise the cow ya know). So prices are expected to go back up. Without "free money" doing it. By your reasoning, that shouldn't happen, right?
The alternative was not a collapse, it was for people to realize that sometimes bad things happen and you shouldn't make them worse because you feel out of control. If the government wanted to be heavy handed, they could have required work from home be allowed unless it was an unreasonable burden. They could have made people with certain comorbidities eligible for disability until the vaccine became available. They could have mandated that employees be paid to walk for one hour each day and provided some sort of tax credit for it. There were all sorts of ways to be less stupid that would not have involved a collapse of the economy.
I guess this is industry dependent, but I would say this is probably not true as a general matter. Lots of companies could not get price increases ahead of their costs but now that inflation has finally moderated, the prior cost increases are allowing them to rake in big margins that give them room to give raises while still maintaining a good level of profitability.
I think you are pretty close to where I am leaning. In 2007-2009 we had a market collapse 50% vs 30% this time around. But we also felt real pain. Massive crashes in net worth, layoffs to 8% unemployment, 10-20% pay cuts. Millions just walked away from their homes.
This isn't pain like that. It's not even half. This economy/recession will look like 1980/1981 not 2007-2009.
My understanding is that before the low inflation of the 2000's, it wasn't uncommon for companies to give out 5% raises. And the 5% annual raise was basically the 3% annual raise of the 2000's, just the minimum required for people to be generally satisfied. If inflation stays in the 4% range, I think you'll see enough employees leaving for raises that employers will adjust. If inflation really goes back to the 2% range, then I'm not sure inflation has been around long enough to change expectations and you may not have enough people leaving to force employers to catch people back up and people that are not early in their career are probably going to have to change jobs to get back on track.
I follow The Kobeissi Letter on Twitter. A couple of days ago there was a post about the S&P 500 being flat this year with the exception of seven stocks: NVDA, AAPL, MSFT, AMZN, GOOGL, TSLA and META. The AI trend is pulling the market up. Just thought it was interesting.
Supply has always been a piece of it. I always admitted that. If you can produce more than the market demands prices decline. Vehicles are a perfect example.
Couldn't get chips for new cars so everyone bought up/bid up used ones. But at the same time, if we don't put thousands of (if not 10's of thousands) of excess dollars in people's pockets and drop Fed Funds rates to zero, it would only go up a little before people couldn't afford them.
It's very clear to almost everyone that supply chain disruption deflated certain supply side channels and equally clear that fiscal and monetary policy inflated purchasing power.
So are you and I finally at place where we are not debating whether free money had any effect? The more intelligent debate would be:
Was the cumulative inflation 20% supply chain disruption and 80% free/easy money as I would posit. Or is it 80% supply and 20% excess demand as someone in your camp might suggest.
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