Perhaps there is no alternative. But one could understandably be feeling cautious about owning stocks in the current environment. And while it seems that investor awareness of fundamentals has been suspended for the time being, such laws have not been permanently repealed. They will eventually return, and when they finally do it may be with a vengeance.
Rare Air Up There
Stocks today are truly in rarefied air. At 23.6 times as reported trailing 12-month earnings on the S&P 500 Index (NYSEARCA:SPY), my nose figuratively bleeds as I write this article. Let's put this current valuation into perspective.
To begin, the stock market dating back over the past century and a half has had only 128 months out of more than 1,745 when it has traded with a price-to-earnings ratio in excess of 23 times as reported earnings. Of course, at roughly 7% of the time, today's valuations might not seem quite so unusual. But it should be mentioned that 75 of these months took place in and around the inflating and subsequent bursting of the technology bubble (it should be noted that none of them occurred surrounding the stock market peak in 1929). And another 36 of these months occurred during the depths of raging bear markets when it wasn't a rising "P" that caused valuations to appear so high but instead was a collapsing "E" in the midst of a crumbling economy. This leaves us with just 17 months in history remaining. Twelve of these months occurred in the early 1990s after corporate earnings had fallen by more than -35% in the aftermath of what had been an otherwise mild recession and stock market correction. And the remaining five are taking place today. In short, what we are seeing right now in the U.S. stock market simply does not happen very often, and when it does something truly unusual is going on.
Comparable Times In History
Now some seek to explain away
http://seekingalpha.com/article/3973130-fundamentals-schmundamentals
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