Written by Lance Roberts, Clarity Financial
Simon Black made a very interesting observation a week ago Friday:
“A few days ago Charles Schwab, the investment brokerage firm, announced that the number of new brokerage accounts soared 44% during the first quarter of 2017.
More specifically, Schwab stated that individual investors are opening up stock trading accounts at the fastest pace the company has seen in 17 years.”
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Hmm…remember what happened 17 years ago?
“Investors are once again clamoring to buy expensive, popular stocks at price levels never before seen in the history of the stock market.
At 26.44, the S&P 500’s Price/Earnings ratio is the highest EVER, except for two occasions: the 2008 crash, and the 2000 crash.
At 28.93, the “Shiller P/E ratio”, which looks at company valuations over a longer-term, 10-year period and adjusts for inflation, is at the highest level EVER, except for two occasions: the 2000 crash, and the 1929 crash.
Price to sales ratios are near the highest levels in at least 50 years.
Price to book ratios haven’t been at this level since the 2008 crash.
And the stock market cap to GDP ratio is the highest since the 2000 crash.”
While such a data point doesn’t mean the markets are set to crash tomorrow, it is certainly worth considering the “risk” being undertaken to achieve potentially very limited “rewards” from current levels.
