Why we remain bears
Charles and Andrea discuss our core house view; that we remain convinced bears, S&P 500 down at least 20% from here is our starting point. Quarterly earnings & other triggers to send the equity market down in waves, these downward lurches could take more than a year to roll through. The current self-confidence driving stock prices higher merits the comparison of current forward p/e ratios to their only precedent, the 1999-2000 tech bubble, a comparison with the 2½-3-year bear market that slumped in 2000 and finally ended in early 2003 thus also merits comparison to now. Equities offer no margin of safety owing to these high p/e and EPS expectations. This makes them unappealing from a risk-reward perspective. We keep a cautious stance on equities owing to the lack of apparent value at current prices, but a sudden drop to retest this cycle’s lows is unlikely in the near term.