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Opinion: The U.S. stock market is 66% higher than it should be

I have identified the liquidity risks created by the European Central Bank and the Federal Reserve in the tightening of monetary policy, in the reduction of the Fed’s balance sheet, and the likelihood that these risks will prick the asset bubble that the market is in today. 

In previous articles, I have offered alternatives to the traditional buy-and-hold methodology, and I think everyone should consider heading that way because strategies like “lock and walk” can work no matter what happens. The risks in the market today are extremely high for buy-and-hold investors because the liquidity picture is changing for the worse, and that is fundamental in nature. But longer-term technical observations point toward serious risks as well. 

My longer-term macroeconomic analysis, The Investment Rate, is offering warnings that this market is 66% higher than it should be. Given the changes in liquidity and technical observations happening now, those risk warnings should be heard with an acute ear.

DYI:  Using dividends as a basis for determining fair or average value the market is currently 130% (rounded) above its long term dividend yield (current yield 1.89%) of 4.38%.  This is why a decline of 50% to 60% would end up being nothing more than a run-of-the-mill decline!  So hold on to hats and your cash better values lie ahead!

DYI