The bulls are clearly in charge

You may have noticed the stock market rising lately 

Much of the gain isn’t so much “the market” as a handful of mega-cap stocks. Nonetheless, the bulls are clearly in charge. 

The question is how long they will stay there. History suggests longer than many market bears think.

Sarah Hansen at Morningstar thinks the market is fairly valued. David Rosenberg, not so much.

Bank of America strategists led by Savita Subramanian recently concluded that stocks are still poised to climb higher. 

But then we get to that timing thing. 

The market today trades at a healthy 24X trailing earnings.

For the record, I am not selling my stocks and I'm actually shifting a larger portion of my portfolio into equities, although not growth stocks.

My good friend David Bahnsen note that 75% of the S&P 500 stocks are trading at 15X their earnings, or more. 

That means you are paying $15 to acquire $1 of profits—which makes sense only if you think someone else will pay even more. 

To be fair, that’s been a good bet lately.

This shows the current bull isn’t, as often thought, simply a function of the “Magnificent 7” stocks becoming brutally overvalued and dragging the index higher. 

They are indeed brutally overvalued, and they are dragging the index higher. But the rest of the market is hardly cheap.

Yardeni’s take:

“The S&P 500 market-weighted stock price index is up 43.2% since the current bull market started on October 12, 2022. 

The equal-weighted version of the index is up 29.5% since it bottomed on September 30, 2022. 

We don’t see a Mag-7 bull market and a flat or bear market in the others. It’s better described as a bull and a super bull. 

My /John Mauldin/   experience over many decades shows markets can get far more overvalued than I thought possible. I hesitate to project when this one will end.

But I’m sure it will.

Louis Gave: “I never tire of quoting Beat Notz, who many decades ago told me ‘it’s an easy business: just figure out if there is more money than fools, in which case asset prices rise, or more fools than money, in which case asset prices struggle.’

John Mauldin 15 March 2024 


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