The Mother of All Stock Market Manias
It seems that only 0.1% of the time during the last 70 years has the S&P 500 traded at a higher forward PE (price-to-earnings) multiple than it does today. That’s equal to 4 weeks out of the 3,640 weeks since 1950.
In a world faced by COVID lockdowns, staggering amounts of debt, central bank money-pumping extremes, and outright fiscal insanity in Washington, why is the present moment more propitious for the valuation of corporate earnings than during 99.9% of the time since the Korean War?
Of course, it is not. Not remotely so.
Instead, the Fed and the other central banks have led the robo-machines, day-traders, and Robinhood waifs into the most hideous stock-chasing mania in recorded history.
Here are just a few of the market extremities:
- Amazon is now 43% of the S&P 500 consumer discretionary index;
- Nearly two-thirds of the market is underperforming so far this year;
- Year-to-date, only one in three stocks is actually in the green;
- One in five stocks is down 50% or more from its all-time high;
- The five largest stocks in the S&P 500 have a combined market cap that equals that of the “smallest” 389 stocks;
- Apple, Amazon, Microsoft, and Google—four companies—have a combined market cap (over $6 trillion) that is greater than the GDP of every country in the world, minus the US and China;
- Tesla, having surpassed Walmart (with one-twentieth of the revenue!), has become the ninth-largest stock in the US.
How could the S&P 500 be trading at its highest multiple in 70 year
Article from LewRockwell