With the S&P 500 down a staggering 6.5% from its post-QEtc highs, the world and their wealth adviser is beginning to get that Deja Deja Deja Vu feeling all over again. The commission-takers are being trotted out left, right, and center to spew forth every market myth from "money-on-the-sidelines" to "markets-hate-uncertainty"; from "valuation is cheap" and "whatcha' gonna do - buy bonds at 1.5% yield?"; and from "healthy retracement" to "long-term horizon". In today's episode of epic realizations of the truth, we thought we would look at year-end multiple expansion (contraction) seasonals - since we suspect earnings expectations (which are still running dramatically high; even though recently trending lower) - remain exorbitantly hopeful of a fiscal cliff resolution bringing joy and happiness to the world. Fact: post-election-year multiples have on average contracted around 1x versus a 0.6x expansion in non-election years.
The chart below shows the change in P/E multiple for the S&P 500 on average through the year - in election years, non-election years, and the current year...
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Chart: Bloomberg