Ok, well global stocks hit another all-time high overnight.
Imagine that, right?
That seems to support the message being conveyed by the latest reading on Yale’s one-year investor confidence index which, as I noted on Sunday, shows that quite literally everyone from the pros to the E*Traders expects the Dow to be higher in a year …
Of course if you look below the surface, not everything is as rosy as it seems.
As SocGen’s Andrew Lapthorne writes, in a note out Monday morning, “the Nasdaq was down last week, as was the S&P 500 on an equal-weighted basis.”
That latter point is something we talked about here at length on Saturday in “This Was The Worst Week Of 2017 For ‘Bad Breadth’.” Not only was the equal-weighted index down last week, it had its worst week of 2017 versus the regular S&P!
Ok, so against this backdrop, the above-mentioned Andrew Lapthorne is sounding a bit exasperated these days.
And you can’t blame him.
Anyone who, like Andrew, has consistently tried to warn investors that what we’re seeing in markets is starting to look more insane than a Saturday morning Trump Twitter tirade, has been summarily dismissed by legions of carry traders and vol. sellers who continue to ride the global, central bank liquidity tsunami all the way to profit promised land.
But Andrew isn’t giving up. Here’s his Monday warning which amounts to this: when you get in at the top, the very best you can hope for is “paltry” returns….
Stocks valuations remain remarkably high, but as valuations alone tell us little or nothing in terms of market timing, it seems valuation concerns are increasingly ignored.
That said, if individual stock valuations are largely unhelpful for timing markets, their correlation with future (one year forward or more) returns is relatively good.
Today’s levels infer paltry low single digit future returns if we use history as our guide. Just to get back to average US enterprise values would need a 30% fall from here.
Surely that should still be a concern?