The S&P 500’s P/E ratio, standing at eight times that of international stocks, raises concerns about its soaring valuation. Notably, even during the 2008 crisis and the 2001 Dot-com bubble peaks, the S&P 500 was not as expensive. The current market scenario sees the Magnificent 7 with a market cap surpassing the GDP of all countries, except China and the US. Despite forecasts predicting no first-quarter sales growth, an anticipated 6% year-over-year earnings growth hinges on stock buybacks and margin expansion. However, historical trends indicate that margin estimates tend to start high and decline, raising questions about the sustainability of the current optimism. Current estimates project a 10.9% margin, with 2024 expected to rise to 12%.
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US equity positioning remains quite stretched to the long side, per Goldman. pic.twitter.com/0okKdKZg1c
— Markets & Mayhem (@Mayhem4Markets) January 15, 2024
Only 2021 has seen margins in the S&P 500 at more than 11% in recent history. But in 2024, margins are expected to rise by 12%. What is the under/over on that? pic.twitter.com/LwUyHgFvie
— Michael J. Kramer (@MichaelMOTTCM) January 13, 2024
Just how expensive is the S&P 500?
The P/E ratio of the S&P 500 is now 8 TIMES the P/E of international stocks.
Even at the peak before the 2008 crisis, the S&P 500 was less than 4x as expensive as international stocks.
Furthermore, even at the peak of the 2001 Dot-com bubble… pic.twitter.com/R7YoI5H1Da
— The Kobeissi Letter (@KobeissiLetter) January 15, 2024
After an aggressive tightening cycle, 152 central banks around the world expect to cut rates in 2024, including the Fed
Based on history, rate cuts are NOT bullish for the US stock market pic.twitter.com/1zNocy0qaJ
— Game of Trades (@GameofTrades_) January 15, 2024
World Bank Forecasts Bleak Economic Outlook: Worst Growth in 30 Years
The World Bank’s recent report paints a grim picture for the global economy, predicting the poorest half-decade growth in 30 years. Global growth is expected to slow down further in 2024 to 2.4%, marking the third consecutive year of deceleration. Although a slight increase to 2.7% is anticipated in 2025, this growth rate still falls significantly below the average of the 2010s. Geopolitical tensions, including the war in Eastern Europe and conflicts in the Middle East, are major contributing factors to this slowdown, potentially impacting energy prices, inflation, and overall economic growth. The World Bank warns of a “decade of wasted opportunity” without significant policy changes.
Markets are optimistic about $SPX ’s bullish potential, but is that optimism misguided?@marketminute and @MichaelMOTTCM offer their predictions for 2024 and discuss how the Fed’s efforts to fight #inflation could influence the index’s price action.t.co/axEkCaRgtX
— CMC Markets (@CMCMarkets) January 15, 2024
Aggressive rate hikes systematically leads to recessions
This time is NOT different pic.twitter.com/Ry4Yx9S1Xt
— Game of Trades (@GameofTrades_) January 15, 2024