Rationales & Targets
We were reminded a few days ago by our friend and savvy trader, Grant Nobel, that the Russell 2000 Index was about as overvalued as one might imagine, trading at infinity times earnings. It’s bad enough to see the broad S&P 500 at a P/E over 26 and the Dow Industrials at a 21.4 P/E, but a 2000 stock index that shows negative earnings?! Good grief. One would think an index of 2000 small caps just generate something, anything in earnings. Even a year ago, the Russell 2000 were trading over 152 times earnings. Despite the obvious, that a few rotten apples have likely sabotaged the tally, it’s just another example of the lack of value in U.S. stocks. There’s more, too. The S&P Industrials are nearly 30 times earnings and those earnings have fallen 12.6% in the past year. S&P 500 earnings have declined 8.4%. And the earnings for the 30 venerable stocks in the Dow Industrials have shed 13.2%. And a mania is underway. We certainly live in interesting times.