Big Pullback… Followed by New All-Time Highs!
Stocks are overvalued, and that’s exactly why they will continue to make new all-time highs. We are expecting a summer correction due to low volatility and bullish sentiment in the markets, but then, without a doubt, we are heading higher.
For the past 20 years, the average S&P 500 P/E ratio has been 24.6. Today, we are at 25.6. In the late 1990s and 2007, we made it as high as 50!
That’s double where we are today. This, of course, is NOT the only indicator, or even the best one to help us understand where the markets are today, but it is one that is commonly looked towards.
Here is the reality, though…
1. Central banks are literally buying U.S. stocks. They have ZERO costs to print the currency being used to buy shares to keep the markets inflated, and they also have the time horizon of forever if they want. Distorting and manipulating markets higher is their mandate at this point, and the supply of cash they can create is infinite.
2. Interest rates worldwide are lower than they’ve ever been. It’s to a point where a 3rd of the world lives under a negative interest-rate environment. Here in the U.S., we are experiencing a negative real yield, with bonds paying out less than price inflation.
3. Corporate profits are up and technology companies are eating the old economy. Don’t look to the past for market averages in order to predict what the future will be – especially with companies like Amazon and Google changing the way humans live their lives on a daily basis.
Don’t short the market – it’s not worth it. If you see stocks as overvalued, don’t buy them.If you want to short, consider just going to cash. If the market crashes, you can buy more shares.
Timing the next big crash isn’t possible because the fact is the next big crash could lead to a systemic reset of the entire monetary system. This means every single government, central bank, and crooked Wall Street trader is going to be doing everything they can to keep the pump job going.
Do you really think anyone is going to be able to time this correctly? If you do, I have some $40/ounce silver I bought in 2012 that I would be happy to sell you for $30 today.
My prediction is the Dow will have a pullback, and then it will proceed to 30,000, followed by 50,000.
The central banks and powers that be did not go through all this trouble over the past decade-plus to see the entire system implode because they let equities get out of control on the downside.
As long as the central banks run the world, I feel very confident about predicting new all-time highs for these manipulated markets.