What the Media ISN’T Telling You About the Market

by Andrew Zatlin

The stock market makes no sense right now!

Despite discouraging economic news, the market is climbing. And the media is encouraging investors like you to celebrate.

So let me explain what’s really going on here.

For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.

What the Media ISN’T Telling You About the Market

Bad news in the economy is supposed to mean bad news in the stock market.

But after news hit that we’ve officially entered a recession and the Fed expects to hike rates further, the market jumped!

The mainstream media is telling you it’s party time. They’re telling you that a recession means interest rates will finally stop going up… or that the market is oversold and will keep rallying.

Folks, the media is wrong.

Let me tell you what’s really going on…

Should the Market Really Be Trading Higher?

There’s a popular belief that the market is oversold right now.

But buying into that belief can get you into a whole lot of trouble.

To see what I mean, look at the chart below…

It tracks the P/E Ratio of the S&P 500 over the last decade:

The P/E ratio compares the price investors are willing to pay for a company’s stock relative to the company’s earnings.

Financial analysts see the ten-year average P/E is seventeen. And since we’re currently below that figure, they think the market should be trading higher.

But these analysts are being short-sighted….

Covid Skewed the Data

Take another look at the chart:

While the ten-year average P/E is seventeen, if you take out the last two-and-a-half years, it’s way lower than that.

You see, Covid completely skewed the data. The P/E ratio during 2020 and 2021 was around twenty-two or twenty-three. These were unprecedented times.

The more realistic ten-year P/E ratio is closer to fourteen. And right now, we’re at sixteen — meaning the market is overvalued, and has room to fall.

How far could it fall, exactly?

Brace Yourselves

Well, consider what happened in March:

Following a Fed rate hike, the market soared almost ten percent. But within two weeks, it plummeted sixteen percent.

I expect this current rally to end soon. Why? Because company earnings don’t support it.

The earnings of companies like Walmart, Whirlpool, and Target are falling short. In fact, of all the S&P 500 companies that have reported so far, all but one is adjusting its earnings projection down.

Don’t Be Fooled

At the end of the day, it’s common sense.

We continue to be bombarded by bad economic news: a recession, rate hikes, missed earnings projections. And yet the market is rallying.

It just doesn’t add up.

The recent rally might make you want to buy in. Don’t fall for it.

Instead, keep betting against the market.

If you’re a “Pro” subscriber, I’ll show you a specific move that could potentially pay off big.

In the meantime, Zatlin out. Talk to you soon.

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In it to win it,
Andrew Zatlin
Andrew Zatlin
Moneyball Economics