RELATIONSHIP OF INFLATION & PRICE/EARNINGS RATIOS (1900 - 2009)
A couple of good graphs linked to below from Crestmont Research. With the completely unprecedented intervention in the markets by governments to date (see the chart on p. 9 HERE for reference to the U.S.), my guess is that the odds for price stability resulting from all of this are likely quite low. When and to what extent we could get the extremes that lead to P/E’s that look more like a secular bear market low is anyone’s guess, but I continue to think the risk of buying most of the market at these levels is very high, and that one should be extremely picky in individual stock selection right now.
Link to: Inflation & P/E Ratio Graphs
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Related previous post: P/E Expansion & Contraction - Secular Stock Market Cycles
Related book: Unexpected Returns: Understanding Secular Stock Market Cycles
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