Stock Market History

The US Equity Bull Market: Where are we today?

As the bull market in US equities charges into its sixth year, I’ve been chewing on what drives stock prices higher. “Duh,” you say, “more buyers than sellers.” Sure, but what kinds of tailwinds encourage buyers to load up?  And how hard are those winds blowing today? Going into a recession, the stock market tanks in anticipation of a decline in corporate earnings.  Then in time the recession ends, earnings rise, and the stock market recovers.  So recovery from a bear market is driver #1.  Today?  Well, following the smash in 2008, US companies did enjoy strong earnings recovery from […]

Is the Cyclically-Adjusted P/E Ratio Now Unreliable?

We all know the familiar mantra:  buy low, sell high.  But how can we recognize “low” and “high”? One stock market valuation measure receiving some recent attention is the cyclically-adjusted price-earnings ratio (CAPE), which is computed by dividing the current price of the S&P 500 index by the annualized average real earnings-per-share of the S&P 500 constituent companies over the past ten years.  (The CAPE was developed by Robert Shiller of Yale University and is regularly updated on his website.) As John Authers noted in a column in the Financial Times (8/17-18/2013), Merrill Lynch’s head of U.S. Equity Strategy recently […]

Should GOP Investors secretly rejoice?

Since President Obama took office in January, 2009, the U.S. stock market has treated investors handsomely, posting annualized returns of about 19%. An aberration? A fluke of timing? Not if history is any guide. Since 1926 (the inception of data for the S&P 500 stock market index), the average annual total return of the S&P 500 has been 9.8%.  But when a Democrat has occupied the White House, the average annual total return has been 15.4%, while under Republican administrations, 7.8%. You can fiddle with this all you want—building in leads and lags, for example (I’ve done that), or leaving […]