Trader: ‘Don’t Hold Out For Peak P/E’
By Kevin Muir of “The Macro Tourist” fame; reposted here with permission
Let’s talk earnings for a bit. Specifically, how the 2017 tax cut affected S&P 500 earnings.
We all know the story. America’s corporate tax rate was uncompetitive and created distortions in the economy that prevented companies from investing in the U.S. The Tax Cuts and Jobs Act of 2017 was designed to level the playing field and in the process, create all sorts of high-paying jobs. The Federal corporate tax
Which would seem to indicate that the buybacks will drive stock prices to their maximum realizable value just in time for Q4 bonuses. All the while the fed has to keep raising rates because everything looks so rosy. Then all the sudden HY rates spike when something crazy happens. Corps throw their cash into savings instead of buybacks. The pool of buyers dries up. ETF’s are vaporized. Financial Crisis 2.0 is ignited and the Fed has to come up with like a quadrillion dollars overnight. Inflation turns from a stiff breeze into a cat 6 hurricane. Maybe my imagination is getting the better of me, pretty sure Yellen said the ’08 crash was a once in a century thing.