OK, We’re Finally Looking Pricey
After a relentlessly up market late in the year last year and a 5% pullback in late January, that we’ve recovered, we’re finally looking pricey:
* We’re at or near all-time highs in most of the U.S. major stock market averages/indices.
* Valuations on the most over-heated momentum stocks are more than anyone can justify.
* Even stocks growing at less than 7% per year are trading at 16-19 times 2014 earnings estimates.
* Dividend yields on Blue Chips have slipped closer to the 2% level from over 3% early last year.
In addition, the last two jobs reports have not been good and will be pointing to a slower economy if they don’t rebound after the bad weather in the East. China’s economy seems to be slowing which can slow business for our biggest exporters. As well, retailers in the U.S seem to be suffering from more than just the bad weather.
So, we think we’re at a point where it is difficult to keep adding to stock positions. Stops should be tightened on big winners and big laggards, and cash should be accumulated for the inevitable bargains. Valuations on most stocks are not extremely high and a general market pullback followed by some good economic news could make stocks in several groups look attractive again.