The S&P 500 is up 90% since its intra-day low of early March '09 (+94% including dividends), so I thought it might be helpful to put this rally in perspective. As this charts suggests, equity prices are still below their long-term trend, depending on how you like to draw your trend lines. Stocks are not yet ebullient, they are still somewhat depressed. That's consistent with the message of credit spreads and implied equity option volatility, both of which are still somewhat elevated relative to where they have been during "normal" times. It's also the message of PE ratios, which are still somewhat below their long-term average.
BTW, while the gold bugs and Nipponistas are honking loudly, less noticed is that in 2010, the NAsDAQ was up 17 percent, and the Russell 2000 up 25.3 percent.
ReplyDeleteAnd 2011 looks even better....
Plse, everybody check Brian Wesbury calls in mkt inflection points:
ReplyDelete03 2009 and 02 2010. He was perfectly right, he is still positive:
1.Dow fair value at 13000+ on aggregate earnings discounted by 10 y yield (he assumes it well above current level)
2.Smaller gov in US - means P/E expansion(which could be extremely bullish for Japan when it acknowledges the end of it Keynesian era some time in the future)