Market Wrap-up for Nov. 24 - 3 Astounding Facts About Today's Markets

Market Wrap-up for Nov. 24 – 3 Astounding Facts About Today’s Markets


The past five-plus years have made for some amazing returns for equities investors. Here are some cold hard facts to put the rally into perspective.

1. The S&P 500′s Price-to-Sales Ratio Has Never Been Higher

Most people have heard of the S&P 500′s price-to-earnings ratio, or perhaps the more accurate Schiller ratio. What many investors aren’t aware of is the lesser-known price-to-sales ratio. As the chart below shows, this ratio has never been higher:

As we’ve harped on several times over the past few years, while corporate profits are growing as a result of cost-cutting and buybacks, revenues have not been growing nearly as much (and in some cases, not at all). So, on a price-to-sales basis, stocks look pretty rich right now.

2. Even the Nasdaq Is Approaching Its All-Time Highs

One fact that perma-bulls have brought up amid the equities explosion of the past five-plus years is that the Nasdaq was still well off its all-time highs. This suggested the markets may have much further to run, but we’re now closer to the all-time highs of the dotcom bubble days than we’ve been since the year 2000. In fact, Friday’s close of 4,712.77 is just 6.6% off the Nasdaq Composite’s all-time high of 5,048.62, and its Friday intraday high of 4,751.60 is less than 6% off that mark.

3. It’s Been Over Three Years Since the Last 10% Correction on the S&P 500

The quickly-forgotten mid-October pullback that seems to have spooked almost no one saw a 9.8% decline from the highs to the worst intraday lows, by my calculations. This means it’s still been well over 1,100 days since the S&P 500 posted a 10% correction. Since that pullback in 2011, the S&P has gained 75%.

The Bottom Line

Saying the current bull run has been historic is a huge understatement. Traditional metrics like valuation have been thrown out the window amid today’s easy-money environment, tech stocks have almost never been hotter (especially biotech), and pullbacks have been very few and far between (not to mention that they’ve only lasted for very short periods).

Does this mean a huge crash is just around the corner? Absolutely not. Two of the most famous sayings on Wall Street are “Don’t fight the Fed,” and “Don’t fight the tape.” I suggest investors keep these two sayings in mind until something major changes in our current investment environment.

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