The market is now on its way to fully discounting a v-shaped recovery: Stocks are already trading at nearly 20X “operating earnings” (earning minus huge expenses) and are 15%+ overvalued on a long-term cyclically adjusted PE ratio.
So, given that a v-shaped recovery is far from in the bag, it’s not surprising that investors once in a while get cold feet.
Bloomberg: Stocks fell for a second day on speculation a six-month rally that drove the MSCI World Index to its most expensive level since 2003 has outpaced prospects for profit growth. The dollar gained, while oil and gold declined.
The MSCI World gauge of 23 developed nations slid 0.6 per cent at 9:58 a.m. in London, while futures on the Standard & Poor’s 500 Index sank 0.6 per cent. The dollar strengthened against 13 of the 16 most-traded currencies. Oil fell for a third day, copper dropped to a one-week low and gold decreased below $1,000 an ounce…
The drop in U.S. futures indicated the S&P 500 may slide after two straight weekly gains. The 58 per cent rebound in the S&P 500 from its 12-year low on March 9 has pushed valuations in the index to almost 20 times the reported earnings from continuing operations of its companies, the highest level since 2004, according to weekly data compiled by Bloomberg.