The fact is that six out of eight main national stock indexes have crashed since June 2015 (approximate values from the top of my head):
- Chinese stocks are down 40 %
- Japanese stocks are down 25 %
- German stocks are down 20 %
- UK stocks are also down and the sterling has collapsed
- French stocks are down 20 %
- Italian stocks are down 30 %
- Oil prices have collapsed
The only reason we believe the markets are fine is due to the fact that the S&P 500 have not yet collapsed. The US stock market is still holding up, mainly due to record low unsustainable interest rates. On Average the S&P 500 will appreciate by 30 % post the FED starting to rise interest rates (which they started with in December of 2015, resulting in a stock market correction). At this point I wouldn't bet on the normal 30 % appreciation.
The day of reckoning will be here soon enough for US stocks as both the Shiller PE multiple and the market-cap to GDP multiple currently are @ pre financial crisis levels. The rich valuation is combined with an ongoing earnings recession. The US stock market is clearly in a bubble. Furthermore the collapsing Japanese stock market tend to be a leading indicator for the US market. When the US market collapses, everything collapses. I have been super overweight oil and oil related stocks all of 2016 and my returns have been fantastic. I am now selling everything in order to regroup and rethink the situation. I believe last week's post Brexit bull was a dead cat bounce. The day of reckoning may once again be upon us.
US Shiller PE:
Source: http://www.multpl.com/
US market-cap to GDP:
Source: Gurufocus.com
US earnings recession:
Japanese vs. US stocks:
Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving any compensation for it.
