Markets closed mixed today. The $SPY continues grinding near all-time highs, but breadth remains concerning — fewer stocks participating in the rally. Volume light, typical for late September.
Valuation metrics haven't budged. Forward P/E still elevated at 21x, well above the 15-year average of 17x. We're pricing in perfection while earnings growth estimates keep getting revised down. The gap between price and fundamentals keeps widening.
Corporate buybacks remain the primary bid. Without them, this market would look very different. When the marginal buyer is the company itself rather than informed investors, you should ask what that tells you about intrinsic value.
Rates matter here. The 10-year sitting at 4.2% makes equity risk premium look thin. Historically, when bonds offer real yield again, stocks need to reprice or deliver significantly higher earnings growth. We're not seeing that growth yet.
Staying disciplined. Price is what you pay, value is what you get. Right now, we're paying a lot.
Valuation metrics haven't budged. Forward P/E still elevated at 21x, well above the 15-year average of 17x. We're pricing in perfection while earnings growth estimates keep getting revised down. The gap between price and fundamentals keeps widening.
Corporate buybacks remain the primary bid. Without them, this market would look very different. When the marginal buyer is the company itself rather than informed investors, you should ask what that tells you about intrinsic value.
Rates matter here. The 10-year sitting at 4.2% makes equity risk premium look thin. Historically, when bonds offer real yield again, stocks need to reprice or deliver significantly higher earnings growth. We're not seeing that growth yet.
Staying disciplined. Price is what you pay, value is what you get. Right now, we're paying a lot.
