Fears of market WIPE OUT: Indicators hit extreme highs last seen before 1929 and 2008

Fears of market WIPE OUT: Indicators hit extreme highs last seen before 1929 and 2008

Academics say incredible spikes in the S&P 500 over recent weeks are showing patterns similar to market crashes in 1929, 2000 and 2008.

They point out every action has an equal and opposite reaction and stock market investors should pay heed.

So jubilant investors should be on their guard as analysts warn of “overvaluation on a very grand scale.”

Stock Market Crosscurrents author Alan Newman issued a warning note to investors two weeks ago insisting there’s a major “bubble” which could very well go pop.

And it is showing similar patterns with the crash that sparked the great depression, evidenced in the tech bubble burst and the housing sub prime mortgages mega meltdown which the world is still recovering from.

He said: “The cyclically adjusted P/E (CAPE), a valuation measure created by economist Robert Shiller now stands over 27 and has been exceeded only in the 1929 mania, the 2000 tech mania and the 2007 housing and stock bubble.

“We’re still dealing with the same picture, overvaluation on a very grand scale.”

Other academics are also looking at the CAPE measure and pointing at risks to investors insisting the 10-year stock future returns data is lower than those on 10-year US Treasury bonds meaning the spikes are not likely to last.

Analyst Jefferies’ chief global equity strategist Sean Darby has also looked at the data and are also warning equities investors to be careful.

He said: “US valuations start off as being high both on a historical basis and also on a peer group. 

“Certainly based on the Shiller PE, the equity market seems expensive.” 

Last week Express.co.uk commissioned data that showed the UK pound was ahead of a massive worldwide devaluation curve.

Unlike the US, UK stock and bond markets have behaved as if “nothing had happened” in the first 100 days following the Brexit result.

And while the pound may have been hit due to large scale foreign exchange sell-offs – mainly driven by fear – the UK economy has held its ground and is ahead of a global currency devaluation curve.

Silicon Valley based firm Quantiacs, which connects systematic trading strategies with capital from institutional investors, says their data which was studied from 1990, proves the “UK’s economic troubles are greatly exaggerated”.

CEO Martin Frohler said: “The weak pound could become a problem if inflation would rise.

“A weak pound at high inflation could imply, that foreign goods became relatively more expensive, and have put pressure on domestic prices.

“However, the data doesn’t support that yet: the October Inflation Rate in the UK is at 0.9 per cent, an inflation rate which the ECB is jealous of.

“Many central banks around the globe are trying to soften – or devalue – their currencies.

“One might as well argue that the UK just did so through a simple vote, what central banks around the world try to accomplish so desperately: gaining competitiveness.

“If the markets are the best indicator for the shape of the economy, the rumours about the UK’s economic troubles are greatly exaggerated.” 

Published at Fri, 09 Dec 2016 09:47:00 +0000