Six Valuation Measures Indicate Market is Still Overvalued

Mark Hulbert opines in MarketWatch that “The stock market has to fall a lot further before the valuation indicators will be blowing in the direction of higher prices.” He looks at six valuation indicators and maintains that “recent weakness has simply worked off an extreme overvaluation.” Hulbert notes that current valuations are higher than at 71% to 89% of bull market peaks back to 1900. Specifically, he points to the following: Price/book ratio is at… Read More

Where Arnott Sees Value

Rob Arnott of Research Affiliates and PIMCO is finding value in emerging market stocks and high-yield bonds. Arnott tells Brett Arends of The Wall Street Journal that emerging-market stocks have lagged those in the U.S. over the past five years, and are now considerably more attractive than U.S. stocks. And, while high-yield bond yields have fallen to record lows recently, they are still attractive, Arnott says. On average, high-yield bonds yield about 5.3 percentage points… Read More

Tobin’s Q Ratio: “Modestly” Bullish Sign

In the latest issue of Equities and Tobin’s Q, John Mihaljevic (CFA and managing editor of The Manual of Ideas blog) explains that the “Q” ratio made famous by Nobel Laureate James Tobin indicates that stocks are undervalued right now — but says that there could still be further declines before a turnaround. (A special thanks to the Manual of Ideas for highlighting this data.) The Q Ratio divides the total market value of stocks… Read More