What Have we Learned ?
Trump has taught Americans that speculation and leverage are easier than hard work.
Can we unlearn this, it will be difficult and probably will require some combination of inflation and high, not just higher, interest rates. We now are going into the dicey realm of investing. The slam dunk of buying stocks in 2011 and holding on for 9 years with the Fed at your back is over.
Clues into what is ahead…
As Biden’s economic team is announced a pattern is apparent…Main Street is in focus, the worker is front and center…Wall Street will need to go back to basics.
And what is really happening,
As Main Street moves to the forefront, the market is more than likely headed to a median Price / Earnings Ratio and what is that ratio,
Since 1900, the average P/E ratio for the S&P 500 index has ranged from 4.78 in Dec 1920 to 44.20 in Dec 1999. However, except for some brief periods, during 1920–1990 the market P/E ratio was mostly between 10 and 20. And, one more number, the long–term average P/E (price to earnings ratio) of the Dow Jones is around 16.
S&P 500 P/E Ratio is at a current level of 31.24, up from 22.22 last quarter and up from 21.75 one year ago. This is a change of 40.62% from last quarter and 43.67% from one year ago.