Fundamentals:
Given the political climate, inflation, supply chain issues and post COVID headwinds a long term bull market seems unlikely.
Looking at the historical PE ratios for the last century the mean PE has been 16.
In the last 20 years we’ve dipped below the mean once in 2012.
Technicals:
The 200 MA corresponds with the 61.8 Fibonacci retracement level.
Notice also that the upward swing from recent all time lows has a steep and unsustainable trajectory.
That will be a key point of resistance and will most likely end the near term bull trend.
Given the political climate, inflation, supply chain issues and post COVID headwinds a long term bull market seems unlikely.
Looking at the historical PE ratios for the last century the mean PE has been 16.
In the last 20 years we’ve dipped below the mean once in 2012.
Technicals:
The 200 MA corresponds with the 61.8 Fibonacci retracement level.
Notice also that the upward swing from recent all time lows has a steep and unsustainable trajectory.
That will be a key point of resistance and will most likely end the near term bull trend.
Comment:
After reviewing publicly available market insight material from Credit Suisse and UBS I’m turning bullish on U.S. equities in the coming year.
While the near-term remains uncertain, declines should be treated as buying opportunities for those willing to stick with their investments into 2023 and beyond.
A deepening bear market is mostly out of the picture at this point, though the S&P 500 will likely stay below 200 MA until the end of the year.
Here are some highlights from UBS’s House View:
“Today, after a 26% derating over the past 12 months, the S&P 500 trades at a trailing price-to-earnings (P/E) ratio of 18.3x, a level that since 1960 has been consistent with annualized returns in a healthy 7–9% range over the next decade.”
“In our view, there is a 50% probability that broader equity indexes will move meaningfully lower over the balance of the year. The “reflation” scenario could bring upside, but this would require markets to start to believe that commodity supply challenges will be resolved, COVID-19 concerns in China will dissipate, or US labor force participation will rise significantly. We think this is a lower-probability scenario.”
www.ubs.com/glo...22/monthly.html?caasID=CAA...
While the near-term remains uncertain, declines should be treated as buying opportunities for those willing to stick with their investments into 2023 and beyond.
A deepening bear market is mostly out of the picture at this point, though the S&P 500 will likely stay below 200 MA until the end of the year.
Here are some highlights from UBS’s House View:
“Today, after a 26% derating over the past 12 months, the S&P 500 trades at a trailing price-to-earnings (P/E) ratio of 18.3x, a level that since 1960 has been consistent with annualized returns in a healthy 7–9% range over the next decade.”
“In our view, there is a 50% probability that broader equity indexes will move meaningfully lower over the balance of the year. The “reflation” scenario could bring upside, but this would require markets to start to believe that commodity supply challenges will be resolved, COVID-19 concerns in China will dissipate, or US labor force participation will rise significantly. We think this is a lower-probability scenario.”
www.ubs.com/glo...22/monthly.html?caasID=CAA...
Given the economic headwinds and QT ramp up, breaking through resistance still seems unlikely.
Next week’s candle will be important to watch.