We all know how bad things were at the March low. Most, if not all, of the analysts and economists believe we will not revisit the low. If you believe that we won't visit the low, then you should pile everything you have into the stock market because the downside is only 35% and the upside is infinity. I don't have any opinion because I just follow the market and am not try to judge or predict.
But what IF we are heading back to the March low, what would the fundamental picture look like? As of today (11/2) the Dow P/E is at 16.87 and dividend yield of 2.86%. The 10 year notes gives you 3.42%, more than the Dow provided. That alone should tell you the market is no where near undervalue. If the Dow falls to 6,547.05 (March low), the P/E will be 11.28 and yield 4.28%. That is a more compelling proposition for investment.
Remember that as time progresses, our economy may have improved. Earnings and dividend may have risen as a result. If price diverged down and fundamental rose, value is created.
After reviewing the market fundamental above (P/E above 15 and yield < 3%) I will be lighting my exposure to stocks in the next few days. The market action over the past few days were also terrible. The Dow would opened high to closed lower for the day. Such action suggested a lack of demand for stocks. I urge you to revisit your portfolio and make an appropriate adjustment.
Art
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Couldn't agree with you more. I sold CEPH for a slight gain which covered transaction costs. Still Holding NWN and MO.
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