Are Stocks Cheap?

Tyler Durden's picture

As if the question actually needs to be asked, we thought the following 3 charts would provide at least some defense against the constant barrage of "healthy rotation" bullshit currently being used to maintain assets-under-management as professionals unwind their levered longs into a newly-willing retail public. As Gavekal notes, the following chart show that the median stock is trading at valuation levels only seen at the previous stock market highs of 2007 and 2000.

Measuring the valuation level of the median stock in an index can help mitigate the market-cap-weighted bias associated with many index level valuation statistics. This is important because index level valuations that are heavily influenced by a handful of large companies can give a misleading representation of prevailing valuations for most stocks.

In the below charts we show the median valuation for stocks in the MSCI World Index (red line, right axis) and compare it to the Index price (blue line, left axis).

Are Stocks Cheap?

Price-to-Sales - Nope!

 

Price-to-Earnings - Nope!

 

Price-to-Cash-Flow - Nope!

Source: Gavekal

 

The median stock is trading at valuation levels only seen at the previous stock market highs of 2007 and 2000.

So are stocks cheap? It seems the professionals believe NOT...

As the smart money flees...

 

and the institutions dump...