The markets are behaving, with the S&P500 consolidating around the expected baseline of 1950. (See previous article Sep’15: S&P500 resets from 2100 to 1950 )
I suspect the worst isn’t over yet and prices will move lower in the coming weeks or months. Overleveraged Energy/Commodity sectors haven’t capitulated and global trade remains shadowed by overcapacity. These conditions won’t improve any time soon.
Markets could drop 15% from here and only be trading at “fair” valuations. At current earnings, you won’t find “bargains” until the S&P500 is well below 1700.
So where is the market headed? I have no idea, and history is no help. Reference the below chart- today the S&P500 closed at 1951; however, it is certainly in the realm of recent historic valuations that it could trade between the extreme ranges of 1200-2700. [ Chart is based on a 16 year valuation curve of PE 13.5-30 values. ]
Don’t like that uncertainty? Then you shouldn’t be investing in the stock market.
I don’t know where the market is headed but I do know that as long as the S&P500 remains above 1850, we’re safe from a Bear market. ( See previous article Jan’16: Correction or Bear market? )
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