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
________________________________________________________________
Subscribe to:
Post Comments (Atom)
~
Popular Posts Last 30 Days
-
If you're worried about inflation rearing its ugly head next year, you should probably worry about more likely catastrophes, such as bei...
-
As a relatively new blogger, the one thing that has stood out in my mind is the number of Canadian bloggers in the areas that I am most inte...
-
When a company pays a dividend, it's a good thing for shareholders. When a company consistently pays a dividend every quarter, it's ...
-
If you've been holding back from investing in your future just because you don't have a lot of extra cash to spare, I've got gre...
-
If you are looking for high-yield dividend stocks that can beat the market, you might want to check out these three companies. They all have...
-
If you are here to build a portfolio that thrives in all seasons, consider dividend stocks. They can generate steady returns and provide sta...
-
The company's remarkable consistency and low-risk business model make it a "first-choice investment opportunity," according to...
-
One way to achieve financial freedom is to create passive income, or income that does not depend on your active involvement beyond a certain...
-
Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciations have contribut...
-
My top financial goal is to eventually become financially independent. The foundation of my strategy is to make investments that produce an ...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.