It Appears that the Great Wait has Ended and Now Entered into the Multi-Months Declines along with Bear Rallies! Hang onto your Hats, Cash, and Gold the U.S. Stock Market is in for Bumpy Ride!

 

Limbo, Limbo

How Low Can You Go?

DYI:  Using simple back of the envelope arithmetic will provide guidelines for average value for the market.  This average is determined going back all the way to 1871 and averaging the results.  Don’t worry this math work has been done by multiple web sites simply leaving us with some simple arithmetic.

Since this is the Dividend Yield Investor my preferred valuation for determining average or what others call fair value.  Going to multpl.com clicking on dividend yield for the S&P 500 as of 6/16/2022 the yield was 1.69% or price to dividend ratio of 59 to 1 AND the average yield since 1871 is 4.28% or price to dividend ratio of 23.  To achieve the average the market will have to fall from 59 to 23.  This is not a perfect measure as there is the possibility of dividend growth but rest assured the vast portion of this change will come from stocks falling in price.

A little math:  (59 – 23) / 59 x 100 = 61% decline.  Apply a 61% decline to the Dow Jones Industrial Average from the close on 6/16/2022 of 29,927 placing average value at – drum roll please – 11,671!  Absurd!??  When market analyst’s state that the U.S. stocks, bonds, and real estate is in a bubble this simple math illustrates how big the bubble has been blown for stocks.

   DYI