Daily S&P 500 INDEX TRACKER

[Hoop]

Read this somewhere - seems to sum it up


Watching this market is like watching Trump’s candidacy. Everyone is waiting for both to crash and burn but they keep climbing to greater heights. Even Fox News appears to oppose Trump without much effect just as the stock market sets new records in the midst of gloomy economic news all around.

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” ...Benjamin Graham.

Question: how long does it take for a voting machine to turn into a weighing machine?

2 years now and still counting

Chart is factset but I got it from Marketwatch article

[winner69]

Good chart eh Hoop

S&P500 pushes to new record high. Lots of jobs apparently

Maybe the rise driven by those phoney normalised pro-forma earnings

No worries

[boring]

Every 6 months or so, I run some basic metrics to check the valuation of the S&P 500 in comparison to its historical average. I use this to as a guide to determine how much new investment capital to put to work in the US market.

The following pendulum graphs show the current S&P 500 earnings yield and dividend yield relative to the historical average. I've used a trailing 12-month earnings and dividend calculation from figures provided by Aswath Damodaran, Professor of Finance from NYU. The averages are calculated from 1961/62 onwards.

You can see that from a market earnings yield and dividend yield, the S&P 500 is expensive, but not in the excessive or sky high territory. We are still below 1 standard deviation above the historical mean. Growth investors will tend to look at the earnings yield metric while cash flow investors focus on dividend payments.

As of August 11, Thomson Reuters reported 71% of S&P 500 companies have beaten earnings expectations, 11% have matched expectations and 18% have reported quarterly earnings below the consensus estimate. So it would appear than a “disappointing earnings expectation initiated crash” is not in the immediate horizon. If we are due a crash, it's usually something totally unexpected (black swan) rather than the "usual suspects" the media get fixated on.

This stubbornly expensive market could be explained by the pendulum graphs you see on the bottom line. This shows the differential between S&P 500 earnings and dividend yields in comparison to the risk free rate. I have used the current interest rates on the 10-Year US treasury as a proxy for the risk free rate. In the past, the earnings yield as only exceeded the risk free rate by an average of 0.24%. However, in this exceptional low interest rate/low growth environment, we see the S&P 500 earnings yield exceed the interest rate on the 10 year treasury by whopping 3.29% compared to the paltry 0.24% it usually does. The dividend yield has lagged the risk free rate by a historical average of 3.4%, because most stock investors expect gains to come from increasing stock prices. They are happier to settle for much less dividend cash payments for much higher capital gains. Recent times have seen the market dividend yield actually exceed the risk free rate.

The extraordinary low interest rate environment of recent times provides a level of support and liquidity to the stock market. Investors have to put their money somewhere, and interest-bearing instruments have not been an attractive destination. Not everyone has the appetite to put their investment money in gold.

Attachment 8221

The reason I post these graphs is to provide a relative basis for where the market currently is in relation to its historical averages.

I think you can agree that they support the view recently expressed by legendary investor Howard Marks of Oaktree Capital:
"Asset prices are full today. I don't think we're in a bubble. But I view them as on 'the high side of fair' which means nothing is a bargain - nothing is available at laughably cheap prices."

[Hoop]

Thanks Boring ...interesting post

[Joshuatree]

I believe there are always cheap stocks to be had; but i agree with the general mkt values being high.

this from KW is int
"August 12 "Last night all three major US stock indices closed at record highs for the first time since 1999. Does that mean 2000 is just around the corner again?"

[Valuegrowth]

Thank you Boring for your valuable post.

Every 6 months or so, I run some basic metrics to check the valuation of the S&P 500 in comparison to its historical average. I use this to as a guide to determine how much new investment capital to put to work in the US market.

The following pendulum graphs show the current S&P 500 earnings yield and dividend yield relative to the historical average. I've used a trailing 12-month earnings and dividend calculation from figures provided by Aswath Damodaran, Professor of Finance from NYU. The averages are calculated from 1961/62 onwards.

You can see that from a market earnings yield and dividend yield, the S&P 500 is expensive, but not in the excessive or sky high territory. We are still below 1 standard deviation above the historical mean. Growth investors will tend to look at the earnings yield metric while cash flow investors focus on dividend payments.

As of August 11, Thomson Reuters reported 71% of S&P 500 companies have beaten earnings expectations, 11% have matched expectations and 18% have reported quarterly earnings below the consensus estimate. So it would appear than a “disappointing earnings expectation initiated crash” is not in the immediate horizon. If we are due a crash, it's usually something totally unexpected (black swan) rather than the "usual suspects" the media get fixated on.

This stubbornly expensive market could be explained by the pendulum graphs you see on the bottom line. This shows the differential between S&P 500 earnings and dividend yields in comparison to the risk free rate. I have used the current interest rates on the 10-Year US treasury as a proxy for the risk free rate. In the past, the earnings yield as only exceeded the risk free rate by an average of 0.24%. However, in this exceptional low interest rate/low growth environment, we see the S&P 500 earnings yield exceed the interest rate on the 10 year treasury by whopping 3.29% compared to the paltry 0.24% it usually does. The dividend yield has lagged the risk free rate by a historical average of 3.4%, because most stock investors expect gains to come from increasing stock prices. They are happier to settle for much less dividend cash payments for much higher capital gains. Recent times have seen the market dividend yield actually exceed the risk free rate.

The extraordinary low interest rate environment of recent times provides a level of support and liquidity to the stock market. Investors have to put their money somewhere, and interest-bearing instruments have not been an attractive destination. Not everyone has the appetite to put their investment money in gold.

Attachment 8221

The reason I post these graphs is to provide a relative basis for where the market currently is in relation to its historical averages.

I think you can agree that they support the view recently expressed by legendary investor Howard Marks of Oaktree Capital:
"Asset prices are full today. I don't think we're in a bubble. But I view them as on 'the high side of fair' which means nothing is a bargain - nothing is available at laughably cheap prices."

[kiora]

From Colin Twiggs
The S&P 500 is forming an inverted scallop below 2200. A rounding top requires more of a bowl shape with even sides, like an inverted "U". The inverted scallop looks more like an inverted fishing hook, with a much shorter leg on the right. A strong continuation pattern in bull markets according to Thomas Bulkowski, who ranks it 3 out of 23 (1 being best), with only a 4% break even failure rate. The pattern is completed by breakout above the high — 2200 in this case — and would only rally after testing support, around 2100 to 2130. Strong Twiggs Money Flow values suggest long-term buying pressure.

[winner69]

Interesting
http://www.forbes.com/sites/jareddil.../#5649159dac83

As Jarrod says

In my experience, the worst body slams in the stock market don’t come from things that everyone knows about, like Brexit, and the China currency deval. They come from things that people don’t understand. Retail investors won’t understand what’s happening when the “safe” stocks they own are suddenly not so safe.

Over the past month, the min vol/high dividend strategy has started to underperform. I wonder out loud if it portends something more–dramatic.

[Hoop]

Interesting
http://www.forbes.com/sites/jareddil.../#5649159dac83

As Jarrod says

In my experience, the worst body slams in the stock market don’t come from things that everyone knows about, like Brexit, and the China currency deval. They come from things that people don’t understand. Retail investors won’t understand what’s happening when the “safe” stocks they own are suddenly not so safe.

Over the past month, the min vol/high dividend strategy has started to underperform. I wonder out loud if it portends something more–dramatic.

People don't understand because they are media taught and the media is a bad teacher..
The Market Cycle has reached the point for investors to have to learn Market theory to continue making Capital gain..the days of having your Monkey as your Financial Advisor and a dart board in your office are numbered.

I've been trying to get people to learn Market systems recently and I have been socially shunned..Granted its hard for them to do so after several years of successful share investing they think they know it all and have gained experienced.....So for me its good to see this article get mentioned....

What scares me is I've seen this identical period in time happen over and over....This time its a different market metric to last time, as it always is and will be ... but the overall investor behaviour (as seen by high PE Ratios) outcome stays the same.. each time..

I've mentioned that common sense is flown out of the window and that has annoyed everyone from top skilled investors downwards who have this year been blinded and driven by yield greed...creating extremely overvalued stocks especially Utilities which are considered lagging stocks...and this time the excuse to greed is.. " where else can I invest to get a decent yield ?"
helped by the media driven low interest rate = higher PE media bull**** to reinforce that argument

Greed is Greed there's no excuse for that investment action...Emotion kills and greed is an emotion..

PE10 is up to 27 (S&P500).....This is crash territory folks!!..

...so anyone entering this extremely high PE Ratio driven market now using a long term investment strategy and relying on high yield to cover the medium term dips as an excuse has got rocks in their heads for brains.

Buying up Cyclical stocks with very low PE Ratios and reaping very high yield rate as an excuse, they also has rocks in their heads for brains.

If you can't understand, think its a paradox or disagree to what I said above ..then it's time to give the Monkey the sack..

[Hoop]

Amazingly... the US media hyped up this announcement all week expecting numbers of 180,000...once it was released it was quickly removed from the limelight and buried into the back pages....I guess the Media is in a period of Presidential good news and happiness at the moment..who wants to limelight 151,000 bits of bad news..eh.

Meanwhile, Wall St seated at the Mad Hatters tea party table is partying on knowing that the Queen of Hearts will now be reluctant to move on interest rates....."more tea anyone?"

There's been a lot of fuss about non-payroll data over recent years as commentators use it as one guideline to how the FED will react..
Below is a very long term chart which cancels out the media noise and shows the true facts and trends over the last 75 years.

The chart shows the recent period (since 2008) of slightly less growth which is compensated by the extra length of time between contractions..

Also noticeable is less volatility for longer periods between contractions since the 1960's..and especially so, since the mid 1980's...Viewing this recent run on the chart, Is the current low volatile run due to end soon?

Referring back to the September 2 non payroll data.Employment continued to trend up in several service-providing industries while it declined in manufacturing, mining and construction.

I'm personally trending towards primary sector investing atm so this mining data result is not a good result for me