Hello, today I will systematically answer everyone's questions about the trends in the US stock market that have been frequently asked. What stage are we at in the current bull market, and when should we exit? I hope this article can provide you with answers. Now, let's first look at a few indicators together.
First price-to-earnings ratio:
The price-to-earnings ratio of the NASDAQ 100 has reached a high of 38.62, with the corresponding historical peak basically at this position of 38. In fact, over the years, the price-to-earnings ratio has not effectively broken through the position of 38; once it reaches this position, the price-to-earnings ratio begins to drop. Therefore, purely based on valuation numbers, it is currently high, but this is just a simple indicator. The slowdown in corporate profit growth will also pull down valuations, so we cannot solely rely on this indicator to judge whether the US stock market has peaked. Let's continue to observe.
The second indicator: Price-to-sales ratio = total market value / main business revenue or stock price / sales per share. A lower price-to-sales ratio indicates higher investment value for the company, but this value has also reached a peak position.
The third indicator: The earnings per share (EPS) of NASDAQ has recently changed. Although the trend is also in an upward channel, the rise has noticeably slowed down. However, the trend of the S&P 500 is still relatively healthy.
Are you feeling pessimistic after seeing this? Don't worry; there are still good data ahead. Investment is a multi-dimensional decision-making process. Let's continue to look at a few good dimensional data.
First: The US economy is still doing well. The basic components of the mm (US stock basic index) index are the after-tax profits of US companies, heavy truck sales, and credit risk interest rates. Based on experience, this index will definitely reach below 0, and a peak may occur. Currently, there is still a considerable distance from the 0 axis, which means that purely from this index's perspective, the safety cushion is still sufficiently high.
The second indicator looks at the after-tax profits of companies fitted against the S&P 500, with a fit degree above 0.8, indicating a high correlation. The overall trend remains good.
The third indicator, the greed-fear index of the US stock market, is currently still in the middle position, indicating that the market has not excessively leveraged and is in a relatively rational state, so there are not many issues.
The fourth index, the American Cobweb Index, over the past 40 years, events of reversal in this indicator have consistently led the S&P 500 Index by more than a year, making it a particularly special leading indicator. Since logistics in the US stock market have a significant proportion of truck logistics transportation, when businesses foresee a downturn, what do they first cut back on? Expenditure, which is inventory purchases, and this will be reflected in logistics, particularly indicating economic trends. The major black swan event in 2022 actually saw this index show a decline in February 2021, but the S&P 500 continued to rise for about 10 months after the decline, only starting to pull back at the beginning of 2022; now this index has issued a warning again but has provided ample window period.
In summary, I personally believe there may be a certain degree of bubble in the US stock market, with valuations at high levels. Additionally, annual returns have significantly exceeded historical average returns. I currently lean towards a cautious attitude, continuing to reiterate my strategic deployment, gradually taking profits while the market rises. Do not get it wrong; a bull market is a process of continuous retreat. You can use JEPQ and JEPI as substitutes for the index, which provide good cash flow and perform better than the underlying stocks during periods of volatility or decline.
Finally, this does not constitute any investment advice. Currently, the situation is mixed, so invest voluntarily.
