You know where I stand: Markets have been bloated to high heaven via unlimited and unprecedented liquidity injections creating the illusion of a bull market when there is none. Yes indices such as $SPX and $NDX show incredible strength driven by a few single stocks, but as we discussed the rest of the market is far from bullish.
Equal weight keeps lagging:
while virtually all market gains are driven by a handful of stocks:
In fact the broader markets has gone nowhere since mid April:
But still the few stocks are running overall market valuations to never before seen highs:
pushing P/E levels into ever higher extremes:
Who needs earnings growth when all you need is multiple expansion?
Hard to justify valuations with traditional metrics in this environment. You know metrics such as earnings, growth, etc. So best not do it according to none other than Fed hired Blackrock:
‘BlackRock Inc.’s senior quant has bad news for the likes of Bill Gross and Cliff Asness wagering on a comeback for value stocks. In the worldview of Jeff Shen, money managers need new investing methods because there’s no way to tell if betting on ostensibly cheap companies will work again. In fact, comparing share prices to fundamentals like corporate profits or book value is essentially futile in complex markets.
To fix misfiring quant strategies, the co-chief of the $106 billion systematic active equity group has a newfangled suggestion: Investors should scour alternative data for trading signals and end their obsession with valuation metrics.”
Yea, it’s hard to justify valuations in a bubble so best just make things up. It’s different this time. Don’t you know?
…click on the above link to read the rest of the article…