The post-election rout in U.S. stocks has driven the Standard & Poor’s 500 Index down so far that it would have to advance 26 percent to reach the valuation of bull markets since John F. Kennedy was in the White House.
Investors have seen $806 billion erased from the value of American equities since President Barack Obama was re-elected Nov. 6 in the biggest decline since May. The combination of falling stocks and rising profits as the economy recovers has left the S&P 500’s price-earnings ratio below the ending level of eight of the nine bull markets since 1962 and beneath the average of any since Ronald Reagan was in power.
Bears say the 4.8 drop in the S&P 500 and valuations show investors are losing confidence that Congress and Obama will reach a budget compromise that would keep the recovery from stalling. Bulls, including the top strategists at six Wall Street firms, say that the declines are another reason to buy and that stock prices from Apple Inc. to Dollar Tree Inc. are bound to improve as earnings increase.
But don’t worry, the GOP will get all the blame.
source: jwf
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