Valuation thread 1/7

The S&P 500 Index is up 18% from the low in mid June.
Valuation thread 2/7

#Earnings-per-share are up less than 2% since then and guidance has become significantly more cautious.
Valuation thread 3/7

As a result, the realized PE ratio of the S&P 500 Index has increased to a lofty 21. The forward PE has risen to 19.
Valuation thread 4/7
This means the implied #earnings-per-share growth for the S&P 500 Index is 11%.
Valuation thread 5/7

Both #earnings-per-share and #sales-per-share ratio have decreased during every major economic slowdown and #recession.
Valuation thread 6/7

For US #equities to become cheap, defined here as a forward PE ratio of at least one standard deviation slow the 10-year average, the forward PE ratio would have to drop to 15.3, or almost 20%.
Valuation thread 7/7

Assuming an optimistic zero growth in #earnings-per-share - many indicators point to negative earnings growth - the downside for the S&P 500 Index, from a Valuation perspective is significant.
A solid investment framework incorporates more than Macro. Sentiment & Valuation, too, drive markets & asset class returns. I put everything together in the @true_insights_ framework, continuously looking for new investment opportunities and trades. true-insights.net

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More from @jsblokland

Jan 28
It has always been a bit of a puzzle to me why everything in #bitcoin is so extreme. Perhaps it is partly because it’s characteristics as an asset class are pretty extreme. Yet, that does not mean it cannot add value to a well-diversified portfolio. 1/7
In fact, that is exactly what #bitcoin has done since it was created, but also during more recent periods. By allocating a modest portion of your #portfolio to bitcoin, you would have increased portfolio return, without adding #volatility. 2/7
Like for any asset class, it’s possible to derive future returns for #bitcoin. For example by using the market cap of investable #gold, or the value of the insurance policy against fiat currency debasement. You can look and mining costs, network effects, and so on. 3/7
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