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Stocks are Expensive: An Eye-Opening Perspective

Equities are wildly expensive relative to...

by Bob Stokes
Updated: December 22, 2022

The S&P 500 index has been in a downtrend for nearly a year, even so, U.S. stocks remain quite expensive relative to bonds.

Our December Global Market Perspective provided this eye-opening chart along with commentary:


The chart shows the relative performance of the S&P 500 ETF (ticker SPY) and the U.S. Treasury Bond ETF (ticker TLT)... We can see that equities are wildly expensive relative to bonds, way beyond levels seen just before the crashes of 2008 [Great Financial Crisis] and 2020...

This implies that the decline in equity market prices may very well accelerate relative to bond prices. On the other hand, bond prices could possibly advance and outperform stocks, but our analysts see this as unlikely.

Even so, many money managers are optimistic about stocks for 2023.

A Bloomberg survey conducted by reporters got in touch with fund managers and strategists between Nov. 29 and Dec. 7. Here are the results:


71% of those surveyed believe stocks will climb -- only 19% believe equities will fall. For those expecting gains, the average response was a 10% return.

This informal survey of 134 fund managers incorporates the views of major financial players like Blackrock and Goldman Sachs Asset Management.

In Elliott Wave International's view, the very fact that such a high percentage of money managers are optimistic about stocks is a red flag in and of itself.

Besides U.S. stocks being expensive relative to bonds, there are many more warning signs -- in the U.S. and around the globe.

Those warning signs include the Elliott wave price patterns of major global stock indexes, which you may want to review for yourself.

Read the 50-plus virtual pages of our comprehensive Global Market Perspective, so you can prepare for what may take the majority by surprise.

Click on the link below to get started now.

Most Global Investors Will Be Unprepared for a Bear Market...

...If history is any guide.

Read this quote from an Elliott Wave Theorist:

Profits may accrue to many investors in one-way trends, but over a complete cycle from low to high to low, nearly everyone loses money. Why does it happen?

Written over 100 years ago, One-Way Pockets offers the first researched study of financial-market psychology. A stock broker wondered why his clients lost money over a full cycle in the stock market. After all, he reasoned, if stocks were back near the same level they started, shouldn't his clients have broken even? The pseudonymous Guyon studied his clients' activity statements and found a consistent psychological change among them that explained the losses: At bottoms, they were short term buyers, whereas at tops, they were long term buyers.

Remember, the collective psychology of investors around the world is patterned.

As we approach 2023, that psychology is the same as when One-Way Pockets was written.

Most investors will be unprepared for the next bear market yet,... you can be different.

Follow the link below to read our December Global Market Perspective for financial insights that will help you to protect your portfolio.

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