From 2016 to now, the S&P rose 86%. In that same time period GDP only grew 11%.
From 2005 to 2015 the S&P rose 96%. In that same time period GDP grew 19%.
From 1994 to 2004 the S&P rose 118%. In that same time period GDP grew 39%.
From 1994 to 2004 the S&P rose 202% higher than the GDP. From 2005 to 2015 the S&P rose 405% higher than the GDP. Finally, from 2016 to now, the S&P has risen a whopping 681% more than the GDP.
The S&P is currently priced at 4,283 and has grown 681% more than the GDP since 2016.
But what would be the current price of the S&P if the market behaved like it did, relative to the GDP, between the years 1994 to 2004 and between 2005 to 2015?
If the market was only up 55% since 2016 as opposed to 86%, it would mean the market would be 400% higher than GDP which is similar to the percentage increase during the period of 2005 to 2015. In this scenario the current 2022 price of the S&P would only be 3,230.
However, if the market was only up 23% from 2016 as opposed to 86%, it would mean the market would only be 200% higher than GDP which is similar to the percentage increase during the period of 1994 to 2004. In this scenario the current price of the S&P would only be 2,506.
So what does all this mean? Is the market ridiculously overbought? Was perhaps the market chronically under bought between 1994 to 2015? Bears will say we are living in a super bubble headed towards a crash of epic proportions. Bulls will say living with higher equity prices compared to GDP is simply the new norm. It is difficult to say who is right just yet. But one thing can be said. We are in uncharted territory ladies and gentleman.
Submitted August 19, 2022 at 01:55AM by Neorio1 https://ift.tt/6QRJG3j
