Is The Stock Market Cheaper After The Crash?

If we want to understand whether the recent bounce is a true buying opportunity we need to believe that stocks are cheaper.

Is The Stock Market Cheaper After The Crash

We need to look at the S&P 500 and the Stoxx 600 multiples, which suggest that forward Price to Earnings has not fallen nearly enough, and has returned barely to 2018 levels, which were already elevated.

The earnings season also shows us the poor level of growth in sales and earnings almost in every sector. Considering this earnings’ season has only included two weeks of lockdown, the severity of the second quarter hit may be underestimated.

Consensus estimates for 2021 earnings also seem surprisingly bullish. We need to understand that the 2020 downgrade cycle may be partly discounted by the market, but the 2021 downward revision of earnings estimates has barely begun.

Guidance, dividends and buybacks are being slashed, therefore we need to be very selective and look at opportunities knowing the depth od earnings’ revisions ahead and the impact of the crisis on cash flows and margins.

Comments

Comments (7)

author
Dennis Humm
There is still some positivity. Once again the cryptocurrency world has been able to gather strength and mostly influenced by the Bitcoin.
2020-05-14 16:00


author
Katherine Tess
We just had one of the biggest and quickest stock market crashes of all time.
2020-05-14 16:05


author
Niall Casey
The market will eventually go down again
2020-05-14 16:12


author
Claire Wynne
Stocks are overvalued because interest rates are being held down. There is no where else to get a return, so more demand for stocks. That won't change. Interest rates are going to stay low long term.
2020-05-14 16:18


author
Kevin Keller
I think there's more pain ahead but, who knows?
2020-05-14 16:27


author
Ben Wright
We are on a timebomb just wait and watch
2020-05-14 16:40


author
David Kelly
Fed too busy printing $
2020-05-14 16:46

Trending

Loading…
Loading the web debug toolbar…
Attempt #