Tag Archives: Forward PE

Market Valuation Update … How are we doing? Forward PE Ratio Review

As mentioned multiple times … with recent examples here and here by almost any metric Capital Market valuations have been and are stretched.

As a reminder this does not mean that markets have to come tumbling down to earth … just that heightened risks of sharper declines may be possible. Also as a reminder, just like our teenager with oversized clothes grows into them … as earnings increase faster than Capital Markets rise, valuations can come back in line! YAY

Updated Valuation Metric from our Friends at JPMorgan

And while still stretched take note of the very far right of the graph as it has smartly turned over as earnings outpaced Capital Market Growth



This is why the Graph is moving in a better direction – huge expected earnings in view….

Nice….

Still no time to swing for the fences, which we never do- but good progress…

Have a Great “Better Valuations” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Q 4 2020 Newsletter Video Audio Podcast Review of Year Events, Cause and Effects By John Kvale

Welcome to our Video and Audio Podcast Review of our Q 4 2020 Newsletter. For those on the road or just unable to grab the time to read, our podcast type review gives you the behind the scenes insight to our thoughts, observations and deep views of the entire Newsletter.

Click here for a direct link to an electronic version (an early peek-good ole fashion paper versions are on their way to you shortly) and here for our Newsletter page

Unlike the last two Newsletters which had very little economic and market related comments, this one is all about where we have been, what has occurred and where we may be going!

J.K. Financial q 4 2020 newsletter

Let’s get going!

Thanks in advance!

Q 4 2020 Newsletter

(YouTube)

As the spread of the Covid Virus occurred, Capital Market Participants in true anticipation form, voted with their feet and sold assets across the board well ahead of the eventual lock downs.

The largely followed S&P 500 (Larger US Companies) fell over 33% along with major international markets such as the German Dax falling over 35% and US Small companies represented by the Russell 2000, falling over 40%.

The most startling item of the drop was the speed at which this drop occurred, 27 days!

Ignoring the speed of these most recent declines is a bad idea as we need only look earlier in 2018 to see ANOTHER very fast drop.

The FOMC Steps In – Lowers Rates

By Mid-March as Capital Markets continued their descent, the FOMC (Federal Open Market Committee) led by Jerome Powell, dropped the hammer on interest rates by a full 1% to zero. During normal times, .25% is the usual adjustment as can be seen by the late 2019 and early 2020, non-crisis adjustments.

FOMC Adds More Fuel

Correctly using the financial crisis of 07-09 as the play book, the FOMC took the bazooka out, and starting buying assets to flood the markets with liquidity.  The current bazooka is much bigger (about 3 X) this time as can be seen by the difference in balance sheet increase of $1 Trillion in 07-09 versus the $ 3 Trillion and counting increase currently.

It Worked (Maybe Too Well), Capital Markets Took Notice

You know us to be very positive – all through the many negatives that have occurred !

You also know we will call it like we see it!

Markets have officially gone too far and are ahead of themselves, expect bumps and no extra risk taking is warranted at this time – CAREFUL!

We hope you enjoy … talk to you Next Year – 2021 !!!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com