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The Eight Best Predictors of the Long-Term Market
Wall Street Journal ^ | August 6, 2018 | Mark Hulbert

Posted on 08/06/2018 12:07:26 PM PDT by Wuli

"Here are the stock indicators with enviable track records - and the cautionary tale that they tell".

..........

"Bubble Flashbacks" "The only other time it was more bearsih (...since 1951...) was at the top of the internet stock market bubble".

[areas that are] "Overvalued by Almost Any Measure" "Ratio of S&P 500's current reading to average since 1954" "Household Equity Allocation" "Price/sales ratio" "Price/book ratio" "Q Ratio" "Buffet Indicator" "Dividend Yield" "Shiller P/E (CAPE)" "Price Earnings ratio"

.........

(Excerpt) Read more at wsj.com ...


TOPICS: Business/Economy; Editorial; News/Current Events
KEYWORDS: economy; stockmarket
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I remember when warnings about the Internat and dot.com bubbles were greeted at the time with claims that "the economy is different now" and the warnings could be ignored; then those bubbles burst.

Meanwile, thankfully, my pension funds investment commiitee and the Chief Investment Officer immediately shrunk the pension funds exposure to the U.S. markets and broadened non-stock and foreign categories of investment. The fund has out-performed the main U.S. market indicators from early 2000 on. Yes, after the Internet and dot.com bubbles burts they did buy back in on some of the then deperessed U.S. stocks, and thankfully again got out of U.S. banks and many other finance related outfits as the real estate bubble was defying reality.

Usually, when the stock market has been cheering the loudest for a long time, warnings signs for a lower market are warning to plant your nest egg for the long term, not the short term.

1 posted on 08/06/2018 12:07:26 PM PDT by Wuli
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To: Wuli
For long term investors, a picture is worth 1000 words!


2 posted on 08/06/2018 12:10:57 PM PDT by entropy12 (1 Mil Daca is the shining object to hide 30 mil low quality LEGAL immigrants in last 25 years)
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To: Wuli

Hope market stays high through Oct 2020.


3 posted on 08/06/2018 12:11:56 PM PDT by entropy12 (1 Mil Daca is the shining object to hide 30 mil low quality LEGAL immigrants in last 25 years)
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To: entropy12

OMG, “Black Monday” is one-tenth the size of “Black Tuesday.”


4 posted on 08/06/2018 12:12:39 PM PDT by Steely Tom ([Seth Rich] == [the Democrat's John Dean])
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To: Wuli

Yield = (p/e +G) t

Where t is the trunp factor.

This time there is t


5 posted on 08/06/2018 12:17:19 PM PDT by bert ((K.E. N.P. N.C. +12) Sanctuary is Sedition)
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To: Wuli

Trump is a game changer.

People have more disposable income and are more secure in their jobs. There is a lot of cash sitting in checking and savings accounts. Some of the tax cuts will find their way into 401k’s and IRA’s.

The market will go to an overbought position at some point, but, personally, I believe we are looking at another 20% before it is time to get into a financial safe space.

YMMV


6 posted on 08/06/2018 12:19:33 PM PDT by NY.SS-Bar9 (Those that vote for a living outnumber those that work for one.)
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To: entropy12

A graph without labels is worth ... zilch.


7 posted on 08/06/2018 12:20:05 PM PDT by TexasGator (Z1)
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To: Steely Tom
"OMG, “Black Monday” is one-tenth the size of “Black Tuesday.”

And lasted some good sized fraction of a year versus 26 years

8 posted on 08/06/2018 12:23:57 PM PDT by Attention Surplus Disorder (Apoplectic is where we want them)
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To: All

Historical norms fail in the face of massive deregulation and the slashing of the corp tax rate.

Also the general confidence engendered by Trump is a significant factor.

Normally I would agree with much of this analysis. While I expect corrections - I also expect a bull market for the next six years.


9 posted on 08/06/2018 12:32:16 PM PDT by TheTimeOfMan (A time for peace and a time for war)
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To: TexasGator

“A graph without labels is worth ... zilch.”

It looks like the Price/Earnings ratio of the S&P 500.

Stocks are selling for a very high price now, compared to the earnings they produce.

The long term average is 16.


10 posted on 08/06/2018 12:55:16 PM PDT by BeauBo
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To: Wuli

Would someone with access to the article please list the 8 indicators?


11 posted on 08/06/2018 1:01:29 PM PDT by BeauBo
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To: entropy12

Stocks are certainly very expensive by that measure. It may be simplistic, but it’s compelling anyway.


12 posted on 08/06/2018 1:02:56 PM PDT by babble-on
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To: BeauBo
Stocks are selling for a very high price now, compared to the earnings they produce. The long term average is 16.

One way to lower the P/E ratio is to increase E (Earnings) as in a Trump recovery and business earnings skyrocket. Perhaps the market expects this already.

13 posted on 08/06/2018 1:04:57 PM PDT by 1Old Pro
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To: Wuli; All
List the eight warnings please.

Pretty nice giving us an article we couldn't access.

14 posted on 08/06/2018 1:05:57 PM PDT by Lakeshark (Trump. He stands for the great issues of the day. Stay the course!)
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To: TheTimeOfMan; Wuli

“Historical norms fail in the face of massive deregulation and the slashing of the corp tax rate.”

There are two ways to bring the P/E ratio back toward the norm - lower stock prices, or higher corporate earnings.

Prices don’t need to go down, but their growth could be sub-par, while earnings catch up. Earnings would have to double, to bring the P/E back to 16 - that would take years of great growth.


15 posted on 08/06/2018 1:10:19 PM PDT by BeauBo
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To: Wuli

Companies are putting the bite to consumers.

In the short-term, profits will go up.

However, my shopping habits change readily.


16 posted on 08/06/2018 1:16:06 PM PDT by Brian Griffin
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To: Wuli

I was in two Wal-Marts yesterday.

Shoppers were happily putting stuff in their baskets.

I walked out of one Wal-Mart empty-handed but I bought some clearance items for $32.10 with tax at another.


17 posted on 08/06/2018 1:18:14 PM PDT by Brian Griffin
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To: BeauBo

How much of the CEO compensation is based on stock price vs earnings?


18 posted on 08/06/2018 1:18:36 PM PDT by Bratch ("The only thing necessary for the triumph of evil is for good men to do nothing." - Edmund Burke)
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To: Lakeshark

Sorry for the “can’t read if I don’t pay issue”.

My excerpt did include the 8 items that many experts think represent an overvalued stock market.

They were:

“Household Equity Allocation”

“Price/sales ratio”

“Price/book ratio”

“Q Ratio”

“Buffet Indicator”

“Dividend Yield”

“Shiller P/E (CAPE)”

“Price Earnings ratio”

Each of those factors as they are today were compared with their histories going back to 1954. They are all found by those experts to be in bubble or near bubble territories.

They do admit that yes. something not now forseen could change any or each of those factors, and while that which is unforseen could be positive for any one or all of them, the history of that happening - if history is any guide - is not good.

THAT prediction could cause some to panic, while a more sound approach would be to scale down expectations of U.S. stocks for the long term, and diversify investment holdings to have less emphasis than present on U.S. stocks. In other words, don’t run out in the street and yell the sky is falling but do prepare for rain.


19 posted on 08/06/2018 1:22:32 PM PDT by Wuli
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To: BeauBo

Sorry for the “can’t read if I don’t pay issue”.

My excerpt did include the 8 items that many experts think represent an overvalued stock market.

They were:

“Household Equity Allocation”

“Price/sales ratio”

“Price/book ratio”

“Q Ratio”

“Buffet Indicator”

“Dividend Yield”

“Shiller P/E (CAPE)”

“Price Earnings ratio”

Each of those factors as they are today were compared with their histories going back to 1954. They are all found by those experts to be in bubble or near bubble territories.

They do admit that yes. something not now forseen could change any or each of those factors, and while that which is unforseen could be positive for any one or all of them, the history of that happening - if history is any guide - is not good.

THAT prediction could cause some to panic, while a more sound approach would be to scale down expectations of U.S. stocks for the long term, and diversify investment holdings to have less emphasis than present on U.S. stocks. In other words, don’t run out in the street and yell the sky is falling but do prepare for rain.


20 posted on 08/06/2018 1:22:47 PM PDT by Wuli
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