Look at the Schiller P/E ratio for the S&P 500:
This market is expensive and makes me lean toward the correction scenario, however as long as momentum is able to supersede fundamentals we need to invest with what the market is giving us. We can look at moving averages again at the end of April to see if the momentum can continue, but remember that adding long term money to this market is an expensive proposition. The main benefit of investing in this market is that the dividend rate is currently higher than the yield on 10-year treasury bonds. Lastly for earnings to increase, revenue needs to increase. Barry James of James Investment Research recently wrote this to help us understand why revenues are not accelerating in this economy:P/E ratio for S&P 500:
We have previously seen a lot of share buybacks going on as companies were trying to get more money back into the hands of their shareholders. Harvard Business Review found that from 2003 – 2012 S&P 500 companies spent 54% of their profits buying back shares. They spent another 37% paying dividends, which have not left much for trying to grow their business. Much of this can be attributed to the financial crisis and poor economic policies which discourage business risk. We cannot expect the same level of share support in the future, so stocks will remain in limbo a bit longer. However, this should be good for a return of common sense investing in smaller and more value oriented stocks.Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.