You should know -
Earnings for the last 12 months came in around $86.66 per share, meaning that the market is being valued at a Price/Earnings (P/E) ratio of 25.1. For perspective, the historical average P/E ratio is 15.6. Reported earnings for the S&P 500 peaked at $106 per share in the 12 months ending in September 2014. That means earnings are down 18% since then, even as the stock market has moved from 1,950 to 2,180, or 12% higher. In an unprecedented situation, World Central Bankers are buying bonds (introducing negative rates) and some are resorting to buying ETFs.
Be prepared for a full calendar of continued economic & political changes and the financial ramifications that come with them. What will happen in the next seven weeks is significant. There are major events happening in rapid sequence. Here’s the list:
- Aug 26: the Federal Reserve met in Jackson Hole, WY to discuss what to do with slow growth
- Sept 4: the G20 (international forum for the governments and central bank governors from 20 major economies) leaders meet in Hangzhou, China
- Sept 30: the Chinese yuan officially joins the International Monetary Fund’s (IMF) Special Drawing Rights (SDR) basket of currencies.
- Oct 7: the IMF holds its annual meeting in Washington, D.C. of which the World Bank is also a participant.
- Oct 14: deadline for the implementation of the Securities and Exchange Commission's (SEC) new money market rules which are causing money market fund managers to invest in government funds supposedly creating more stability.
You do not elect any of the above institution's representatives but their decisions are having a major impact on your daily lives. Do not be surprised if this starts the formal transition from a dollar standard to an SDR standard in world monetary affairs. We can expect that the dollar will be devalued in the coming years. The U.S. dollar will be just one of several currencies in a basket that will value the cost of future goods and services globally. Think about what will happen with prices when metals, oil, and gas are no longer calculated in dollars.
- Nov 8: the US election and all the uncertainty surrounding that event.
Events happen quickly but patterns and direction show up over longer periods of time and should be carefully observed. There is and has been a lot of patterns taking shape recently. There is major financial engineering happening while most of the news focuses on election drama and the weather.
Keep an eye on your hard-earned savings.
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This is just for educational purposes, and I am not making any specific recommendations. This is simply a guide to assist you in thinking about your own personal position, how much risk you are willing to take, and what your expectations are.