fbpx Skip to main navigation Skip to content


Sales of existing homes rose 4.4% in March which is 5.9% higher than a year ago and the strongest month in sales since February 2007.



There are many ways that analysts try to determine whether a stock, or stocks in general, are too expensive.  A common valuation is the ratio of the current stock price to the forward-looking consensus earnings for the company, or the “Forward PE”.  Since 1986, the average Forward PE for the S&P 500 has been 15.2.  It is now 17.5, or 15% higher than average.  Another valuation is the “P/FCF” valuation, which is the price compared to free cash flow (free cash flow is important because it is a basic indicator of the company’s ability to generate additional revenues).  Since 1986, the average P/FCF of the S&P 500 has been 28.4.  Currently, it is 25.1, or 12% under the average.  Are stocks cheap or expensive?  According to the trailing PE, or the price compared to the trailing 12 months of actual earnings, the S&P 500 is 25% overvalued.  Finally, one more common valuation technique is the comparison of the forward consensus earnings estimates of a company divided by the Moody’s Baa corporate bond interest rate.  According to this metric, stocks are undervalued by 23%.  So, to answer the initial question, are stocks too expensive?  It depends.  (Remember, I’m a recovering lawyer.)



Investors’ eyes are watching a number of flashpoints.  In particular, Syria and North Korea are causing angst.  Charles Schwab performed some analysis recently and determined that the average decline in the U.S. stock markets one day and five days after a U.S. missile attack was an identical 0.2%



Gross domestic product in China grew by 6.9% from a year earlier, a surprisingly positive report and the best growth number since late 2015.  Can China sustain this level of growth given how reliant it is on the state?  Growth in this quarter was fueled in large part by government infrastructure spending.  Every day there’s a new thing comin’.



U.S. stocks posted their first weekly gain in April, and the S&P 500 had its strongest week in two months.  Industrial companies led the rally and it was largely fueled by positive earnings reports (e.g., CSX, Snap-On, Inc.).  For this past week, the S&P 500* increased 0.85% (up 5.54% for the year).  The MSCI All Country X US* increased 0.57% (up 7.88% for the year).  The Barclays Global Aggregate Bond Index* increased 0.38% (up 3.08% for the year).  The HFRX Global Hedge Fund Index* increased 0.17% (up 1.65% for the year).



According to a report from the Economic Policy Institute, the mean (or average) retirement savings for American families between 50 and 55 is $124,831.  For families between 56 and 61, the mean retirement savings is $163,577.  However, because so many families have zero and big savers can pull up the average, the median (the middle value in a list of numbers) may be a better gauge of the state of American retirement savings.  The median savings for a family between 50 and 55 is $8,000 and for families between 56 and 61 it is $17,000.



RETIREMENT SAVINGS:  http://www.cnbc.com/2017/04/21/how-much-the-average-family-in-their-50s-has-saved-for-retirement.html
U.S. STOCKS END TWO WEEK LOSING STREAK: https://www.bloomberg.com/politics/articles/2017-04-21/trump-tax-plan-for-businesses-individuals-said-coming-next-week
TALKIN’ BOUT THE CHINA GROWTH:  http://money.cnn.com/2017/04/16/news/economy/china-gdp-economic-growth/index.html?iid=hp-stack-dom
STRONGEST MONTH SINCE….  http://www.calculatedriskblog.com/2017/04/nar-existing-home-sales-jumped-44-in.html
MISSLES, MARKETS, REACTIONS:  https://horsesmouth.com/how-investors-should-respond-to-uncertain-global-headlines
ARE STOCKS TOO EXPENSIVE?:  As of March 31, 2017.  S&P, Compustat, Bloomberg, FactSet/First Call.