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Marketwatch – Mar 13, 2017 – by Bret Arends
“Presently, we observe the broadest market valuation extreme in history,” writes the chairman of the cautious Hussman Funds investment group, “with the steepest median valuations on record, and the most reliable capitalization-weighted measures within a few percent of their 2000 peaks.”
On top of such warning signs as “extreme valuations, bullish sentiment, and consumer confidence,” he adds, “market action has deteriorated in interest-sensitive sectors… As of Friday, more than one-third of stocks are already below their 200-day moving averages.”
Don’t be fooled by the booming headline indexes. More NYSE stocks hit new 52-week lows last week than new 52-week highs, he notes.
In a nutshell: Run.
According to the World Bank, the total U.S. stock market is now valued at more than 150% of annual gross domestic product. That is way above historic norms, and about the same as it was at the market extreme of 2000.
According to Yale finance professor Robert Shiller, the S&P 500 SPX, +0.04% now trades on a cyclically adjusted price-to-earnings ratio of 30, compared to a historic fair value for this measure of about 16.
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