Market volatility has been blamed on any number of factors this year; the China market meltdown, weakness in the oil patch and the never-ending speculation around when (or if) the Fed will ever raise rates being chief among them. But there is one underappreciated reason for the market’s lack of direction this year, and that is valuation. There is really no way to massage these numbers. Stocks are expensive by virtually any metric you care to choose. Back in September, I highlighted the cyclically-adjusted price/earnings ratio (CAPE), which smooths out the fluctuations of business cycle by taking a 10-year average of earnings. Well, based on that metric…stocks are priced to deliver returns of a rather pitiful 0.5% per year over the next eight years.
We really have a mixed bag. With a CAPE of 31.0, Communication Services is the most expensive sector though it’s a fair bit cheaper than the 36.8 we saw in July of 2013. All the same, I would expect it to get a lot cheaper. Most of the stocks in this sector are cable TV and phone operators – two subsectors with very limited growth prospects in America. ealthcare, with a CAPE of 30.2, isn’t far behind, and it’s not far at all from its all-time highs. Adam has been warning his Cycle 9 Alert readers to steer clear of this sector, and I agree. Yes, the sector is backed by strong demographics, but investors are simply paying too high a price for that growth. The cheapest sector by a wide margin is energy, trading at a CAPE of 12.2. That’s scraping near its lows of the past six years. Of course, the energy sector is also getting roiled by the crude oil supply glut, and this sector is not without its risks.
Source: Charles Sizemore
Related Articles:
- Seeding A Forest Of Dividend Growth Stocks
- 7 Stocks With A Strong Cash To Dividend Coverage
- Optimizing Your Asset Allocation
- Dividend Growth Stocks Are My Conviction
- All Investing Involves Risk
Dividend Growth Stocks News
- 2 Dividend Stocks That are Holding Their Own in 2025 - AOL.com - 5/17/2025
- Tesla Started the Ball Rolling and It Could Mean a 9,000% Growth Driver for These 3 Dividend Stocks - The Motley Fool - 5/17/2025
- The Smartest Dividend Stocks to Buy With $5,000 Right Now - AOL.com - 5/14/2025
- 2 Dividend Stocks That are Holding Their Own in 2025 - 24/7 Wall St. - 5/17/2025
- 3 UK Dividend Stocks To Watch With Up To 5.1% Yield - Yahoo Finance - 5/15/2025
- Automatic Data Processing Inc. (ADP) Dividend Stock Analysis - 5/16/2025
- Air Products and Chemicals Inc. (APD) Dividend Stock Analysis - 5/9/2025
- Waste Management, Inc. (WM) Dividend Stock Analysis - 5/2/2025
- Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis - 4/25/2025
- Abbott Laboratories (ABT) Dividend Stock Analysis - 4/18/2025
________________________________________________________________
Subscribe to:
Post Comments (Atom)
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.