S&P500 and consumers sentiment

in LeoFinance2 years ago (edited)

Before moving on to the analysis of this post I would like to spend a few words about my adventure on Hive. I've been posting on this platform for 114 days now and I'm finally seeing the first fruits of my efforts as a blogger.

The rewards are slowly going up, but what interests me most is the exchange of opinions.

The time available to me is not much, the analysis published every day takes time and is a bit of the legacy that I carry with me from my Telegram channel, then closed following the decision to move here. This decision was influenced by 2 or 3 people that I really thank from the bottom of my heart, not so much for opening me up to a new world, but for their patience in explaining to me how the platform works.

What I don't like about the platform, but I see that it is very much fought against, are the abuses that some beggars carry out in order to get a few pennies, which day by day, however, become a large sum subtracted from the rewards pool. Lately I had one of these abuses that I couldn't overlook, (especially after some of my posts were downvoted without justification, but I think I understood the reason and I accept it) and that had as protagonists a curator of tipu and an account linked to him.

The two of them, elikast (TIPU curator) and alenox, stole 90 USD from the community reward pool in almost 2 months for very low level contents (elikast curated with TIPU worthless alenox posts, mostly actifit posts of a few words, or copy paste posts).

Luckily Hivewatcher took care of the rest. I have no idea what leads people to lose face for so little, but in the end justice took its course.

But beyond that, there are so many things I enjoy and I hope to grow a lot more here with you.

Anyway, thank you all for your support, let's move on to far more intelligent topics.

Consumers sentiment go "bearish"

Today I am posting more real data that is at odds with the narrative of some in the media that the stock markets are at highs and therefore cannot go any higher.
Let's start with a piece of data that relates to "sentiment."
For the first time in the last 14 months, the Conference Board's Consumer Confidence Survey, a survey conducted monthly on a sample of about 3000 ordinary Americans, records a prevalence of bearish views on the markets.

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Analyst firm Stansberry has published a table showing the average performance of the S&P500 Index after every similar result recorded over the past 20 years.

The table shows that when "sentiment" veers toward a lack of confidence in the markets, stock market recovery follows closely behind.
The reason for this correlation is that in a market high the sentiment is between optimism and euphoria. And that is when real stock market declines follow. Conversely, when traders are discouraged, the market is stagnant and can only go up.
A typical argument of the professional pessimistic media is that the prices are at the highs, so the market has reached the end of its upward path.

The most common indicator of whether markets are over- or undervalued is the P/E ratio, which measures the value of stocks relative to companies' actual profits.

image.png

Obviously, if profits are too low relative to the stock price, then the P/E rises, indicating an overvaluation of the numerator relative to the denominator.
In this interesting chart we see that in February, when companies had not yet enjoyed the gains from the first post-lockdown sales, the P/E actually peaked.

However, the exceptional profits recorded afterwards, up to the last quarterly balance sheets that showed more than 80% of the companies with higher than expected profits, immediately reduced the P/E back to average values.
I would also point out that the P/E is a fluctuating value over time and does not allow to define overvaluation (or its opposite) as a cumulative figure.
To put it simply: professional pessimists claim that stock markets have consistently overvalued over the last ten years. But such a claim cannot be made with this indicator.

In fact, from the P/E graph we see that market valuation fluctuates up or down based on economic conditions that favor or disfavor company profits.
The P/E is therefore not a cumulative value, which increases constantly only because the stock exchanges have been in bull market for a long time.
From the chart we see that on the contrary the P/E has had periods of very strong regression in certain years, touching peaks in other years. It has not grown steadily at all, not even as a total average value.
This is a clarification of method that may be of interest only to insiders, but I felt like pointing it out ...

Thanks for reading

Posted Using LeoFinance Beta

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