We continue to collect signals in favor of the imminent start of a correction in the US stock market and the collapse of the bubble on it. CAPE (or Schiller's indicator), Buffett's favorite indicator, Hindenburg’s exchange and Titanic’s syndrome, inversion of the yield curve and much more.
In addition to the above unorthodox methods, there are also traditional metrics such as P/E, EPS, BVPS, etc.). For example, P / E is now an average of 18.4 in the market. That is, for every dollar of profit investors are willing to pay 18.4 dollars. This is a lot. Last time there were so many on the eve of the collapse of the dot-com bubble. This is also confirmed by the PEG ratio (Price/earnings to growth).
Another classic investment metric is the EV / sales (Enterprise value-to-sales) ratio. This metric shows the ratio of the value of the company relative to its annual revenue.
The median value of this indicator is one of the most reliable indicators of market overvaluation/undervaluation since the current market capitalization and the company's debt are taken into account in the calculation method.
So the current Enterprise value-to-sales values for the SP500 index are 3.6. This is almost double what it was at the peak of the dot-com bubble. Note that when the dot-com bubble collapses, the Nasdaq index lost about 80% of its value.
Recently, the markets lacked a reason to start a correction. The coronavirus epidemic is just perfect for the role of a trigger that will trigger the start of a sales wave.
Recall that we consider 2019 the last year of unjustified growth in the US stock market. Already in 2020, it will begin to adjust. The scale of correction is from 50% and higher. Considering that in recent years, shares of technology companies in the US stock market have grown on average 7-8 times (and some issuers have shown growth of 10 or even 20 times), the US stock market will no doubt become the object of massive sales. We recommend participating in this process, selling both the market as a whole (Nasdaq index) and the shares of individual issuers (Apple, Microsoft, Alphabet, Oracle, etc.).
In addition to the above unorthodox methods, there are also traditional metrics such as P/E, EPS, BVPS, etc.). For example, P / E is now an average of 18.4 in the market. That is, for every dollar of profit investors are willing to pay 18.4 dollars. This is a lot. Last time there were so many on the eve of the collapse of the dot-com bubble. This is also confirmed by the PEG ratio (Price/earnings to growth).
Another classic investment metric is the EV / sales (Enterprise value-to-sales) ratio. This metric shows the ratio of the value of the company relative to its annual revenue.
The median value of this indicator is one of the most reliable indicators of market overvaluation/undervaluation since the current market capitalization and the company's debt are taken into account in the calculation method.
So the current Enterprise value-to-sales values for the SP500 index are 3.6. This is almost double what it was at the peak of the dot-com bubble. Note that when the dot-com bubble collapses, the Nasdaq index lost about 80% of its value.
Recently, the markets lacked a reason to start a correction. The coronavirus epidemic is just perfect for the role of a trigger that will trigger the start of a sales wave.
Recall that we consider 2019 the last year of unjustified growth in the US stock market. Already in 2020, it will begin to adjust. The scale of correction is from 50% and higher. Considering that in recent years, shares of technology companies in the US stock market have grown on average 7-8 times (and some issuers have shown growth of 10 or even 20 times), the US stock market will no doubt become the object of massive sales. We recommend participating in this process, selling both the market as a whole (Nasdaq index) and the shares of individual issuers (Apple, Microsoft, Alphabet, Oracle, etc.).
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