Stock Market P/E Nears All-Time Post-2008 Highs




The Stock Market Outsider



Today the stock market soared upwards near its all-time P/E highs since the 2008 crash.

 

The market has reached this level about five times since 2008; all occurring within the last year. And each time afterwards, the market then took a dip for a month or two before recovering back to this level.

 

So the question is, will the market dip back down and cause widespread worry and panic once again?

 

Possibly… however there’s one factor that’s different this time.

 

As I pointed out in my last update, although the current P/E is high, forward P/E is hovering around its average levels, due to a spike in projected forward earnings.

 

Also as stated in my last update, the Mid & Large Caps and Basic Materials & Financial Sectors were (and still are) undervalued compared to future earnings. Likewise, these were the caps and sectors that spiked the most today, and where a large portion of my personal gains came from today.

 

Unless the market continues trending upwards, current P/E will begin falling due to the increased forward earnings.

 

So we’re either left with a situation where the market continues upwards, or investors accept a lower current P/E (likely not the case given the current market sentiment).

 

Personally, I’ve cashed out a large portion of my bullish positions today for nice gains and also took a few bearish positions. Although the market still has potential to trend upwards, it is very likely to fall after a recent spike, particularly when trading at a high valuation.

 

Nevertheless, I always believe in holding both bullish (undervalued companies & value ETFs) and bearish positions (put options in overvalued companies).

 

Invest wisely

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