A triple top with lower lows…from a technical standpoint, this is run-for-the-hills kind of bad. There’s a lot of other doomsaying going on, the most prominent being this leading indicator showing Apple versus Microsoft.
The big conundrum is this: if everyone’s getting ready to dump US stocks, where do they go? Japan and Switzerland are off the table as safe haven currencies, US Treasuries can barely go any higher, gold doesn’t have the capacity to absorb all this inflow, the Eurozone is experiencing what appears to be death by a thousand cuts…
Emerging and frontier markets investors will try to convince you that the developing world is where the returns are, but as I’ve already pointed out in a number of different ways, there are limits to what these other markets can absorb.
So what now?
Cash. What does cash mean? It means precisely this:
Are stocks expensive? By some measures yes, but by many others no.
Maybe a more relevant plot would be cyclically-adjusted P/E or EV/EBITDA since the absolute level of the index reflects a lot of factors. There’s also the fact that, as you mention, there’s nowhere else to run for investors with a long time horizon and a need to beat inflation (so, not pension funds).