Comparison to 2008
A Comparison of the S&P 500 Currently vs. 2008/09
Many wonder how much further the market can fall. Below, we compare the S&P 500 on key metrics in today’s market versus what they were in 2008. There are many arguments for and against being at or near a market bottom. We will briefly discuss both sides based on this data so that you may have an informed opinion as to where the markets may be headed.
At or Near a Bottom: The ValueLine estimated P/E of equal weighted stocks is very close to 2008 levels. Since the ValueLine index is equally weighted, we are led to believe mainly large cap stocks have more room to the downside as the S&P’s P/E ratio over the last twelve months is higher than what it was in 2008. Furthermore, 10-year Treasury yields are currently well below 2008 levels, leading one to believe that bonds are overbought in today’s market.
More Room to the Downside: Although not mentioned below, the unemployment rate as of March 2009 was 8.5%. Currently, unemployment is expected to soar as high as 30+%. The majority of businesses in shopping centers and retail outlets are closed, something we did not see in 2008/09. Furthermore, from a lack of revenue due to the quarantine situation, businesses will be more likely to increase layoffs of workers who are stuck at home. An argument can be made that what we are heading into is a situation that could possibly be worse than what U.S. citizens faced during the Great Recession. From a valuation standpoint, there is much more room to the downside as the S&P 500’s P/BV, P/S, and P/E ratios are all still above what they were in 2008.
Singular Research Staff
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