The S&P 500 is trading at a current P/E ratio of almost 19, compared to a historical average in the range of 14.5-15.5 or so.
There’s a lot more than the stock market that is affected by the FOMC manipulating interest rates.
One of the biggest problems with the FOMC is that there primary premise that economic growth causes inflation is completely wrong.
Two of the worst effects of their manipulation are going against Trump’s important policies. The strong dollar is causing the trade deficit to go up. And the increase in short term government securities interest rates is greatly increasing the interest we pay on Obama’s debt, which is adding a lot to the budget deficit.
Hopefully Powell resigns. He’s not going to change his mind and neither is Trump.
A.C., you might be able to answer my question.
For simplicity’s sake, assume the entire value of the market can be stated in a single index.
Suppose the index started at 5,000 on a particular day. During the day the value fell to 4,000, but by the end it had regained the entire amount and closed at 5,000.
Did anything happen that day in real terms?