US stocks have rebounded in recent days, and many people are speculating whether the market has bottomed out. However, Nicholas Colas, co-founder of DataTrek Research, believes that the data shows that the bottom of the US stock market has not yet come, and the market may fall again in the near future.
Colas said on Tuesday (4th) that while the stock market is happy to see a bottom, investors should prepare for further declines in the short term, as historical indicators show the stock market has yet to bottom , and investors should consider it part of it. a difficult year, just one day.
Colas noted that while historically one-day gains of more than 2% have been common since 2022, the fewer trading days with one-day gains of more than 2% since 2013, the stronger the year tends to be for stocks.
The only exception to this trend is 2020, when the S&P 500 posted 19 one-day gains of more than 2%, but most of these occurred in the first half of the year and were mainly due to market volatility due to the causes. In the second half of the year, the S&P 500 rose more than 2% in just two sessions. So this is not an indication of market health.
In addition, Colas also noted that since 1870, the long-term average valuation of stock prices has been 16 times to 17 times cyclically adjusted price-to-earnings ratio, according to the Shiller PE ratio. However, as of Friday, the S&P 500 was trading at 27.5 times its cyclically adjusted price-to-earnings ratio, and after Monday’s rebound, it was as high as 28.2 times.
The only thing investors can be sure of, Colas said, is that US stocks have moved out of the “danger zone” of more than 30 times earnings.
HSBC strategist Max Kettner also said that the valuation risk facing the S&P “is likely to continue into 2023”, and that most of the decline in the next few months will be due to the decline in profitability corporate, and the S&P 500 could fall as low as the fourth quarter of this year to 3200 points.
