Yes we are still in a secular bear market, but for how long?
Generally speaking, bull markets do not start until stock market valuations (Price Earnings Ratios-P/E’s) are in the single digits. We are still mid teens or higher for the current P/E ratio.
The chart below is from Sitka Pacific Capital Mgt. Sitka has charted the past decade of trailing P/E ratios with that of previous time periods where P/E ratios were also in decline (1901-1920, 1929-1948, 1966-1982). Their conclusion, more pressure on markets with possible lower valuations.
(click to enlarge tables)
In the chart below from Doug Short, we see market indices over four time periods as reflected in the chart legend; all data adjusted for inflation. Conclusion; current trends for US stocks do not seem favorable at the present time if history is to be any guide.
Lastly we have another Doug Short chart reflecting multi-decade P/E ratios. As one can see, bull markets doe not start until P/E ratios are in the single digits as was the case in 1920 4.8x, 1930′s 5.6x, 1950 9.1x, and 1982 6.6x.
Take away: even thought US Stocks fell over 50% from market peak in October 2007 to market lows March 2009, P/E ratios never went to single digits!
P/E ratios, will they go to single digits? If so, when?
Related Article: No Bull, Well.. Not a New Secular Bull Market, Not Quite Yet.
