Yesterday, we talked about what the mainstream financial news isn't telling you, as the stock market continues to rise into headier and headier territory, so today, we are going to discuss just what would need to happen for those lofty valuations to make sense and not feel like we are on a wobbly ladder climbing to the stars.
For stock prices to continue to rise from where they are today, either the P/E ratio needs to continue to move farther and farther away (as in higher) from historical norms, or earnings need to increase. It is possible that P/E ratios for individual stocks that have strong thematic tailwinds at their backs will continue to expand, like Amazon (AMZN) or Nuance Communications (NUAN) that are on the Tematica Select List. For the S&P 500 as a whole, the P/E ratio is well above historical norms, but is still below the… Read More …