8 Minute Read

Tackle Today: Thinking of using Valuation Metrics to Time Your Investments?

April 14, 2021

By | No Comments

Think Again

Traders,

Stock prices are high these days. The S&P 500 trades with a forward P/E ratio of 21.88, which is the highest reading since the dot-com peak in 2000. Some pessimists point to the rich valuation as a reason to avoid buying stocks here.

Here’s a list of problems I see with this logic.

One: valuation is a terrible market-timing tool for short-term market movements. Valuation measures can remain stretched for long periods. And they can extend further.

Two: There isn’t exactly a good alternative. Cash pays nothing. Bond yields are in the tank. Real estate is expensive, and Bitcoin subjects you to insane volatility.

Three: It could be years before a valuation reset arrives, and if prices rise enough in the interim, you still might be buying at higher prices than is currently available – even after a bear market.

Instead of worrying about lofty price-to-earnings ratios, focus on building an all-weather portfolio and trading systems with contingency plans for downturns.

#TeamTackle


Chart of the Day

Cue the Debbie Downers

J.P. Morgan’s freshly released Guide to the Markets includes a chart showing the past 25 years of market valuation. There’s no denying stocks are richly priced. But that doesn’t mean they won’t go higher.


Video of the day

The Queen’s Court


Traders Lounge 11 AM EST

Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.

Cash Flow Condors 8:30 PM EST

Join Tyler Craig tonight as he hosts his monthly Cash Flow Condors MasterMind group.

Halftime Report 12:30 PM EST

The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.

Trade Masters 7:00 pm EST

Join us for a special webinar with the coaches where they’ll analyze some trade setups.


Tackle Trading: Financial Freedom is a Journey. Sign up now for a 15-day free trial.

Financial freedom is a journey

The Tackle Today series is brought to you by Tackle Trading.

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.

# Sign up now for a 15-DAY FREE TRIAL #


Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.

Leave a Reply

Chart Modal

Tackle Trading