Chart of the Week - The Worst Chart

Callum_Thomas
04-18

Late last year US asset valuations reached a major milestone 16-years in the making.

After a golden decade for returns from the depths of 2009, the average valuation score for US stocks, corporate credit (spreads), US Dollar (DXY), and real estate —reached a record high expensive level.

Even the casual observer will notice something immediately from this chart.

Investors had a good-time-for-a-long-time buying when this indicator reached low levels, and had a bad time when buying at high levels.

Basically we went from one of the best buying opportunities in history back in 2009, to one of the worst around the turn of the year.

They say don’t bet against America, but I would say that’s more of a statement about the long-term, as there has been plenty of times where from a cyclical standpoint it made a lot of sense to either bet against or go all-in betting for…

Rather —what you find in macro and markets is that sometimes the best markets have the worst setup, and sometimes the worst markets have the best setup.

Really the key point to make with this chart is that it probably doesn’t make sense for US asset classes to trade at such a premium when political risk is now a lot higher, and recession risk is rising (now at least 50%).

In short — when you price-for-perfection and then find yourself in an increasingly imperfect world, it’s time to pause and think.

(as many now are… see bonus charts below) $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ $Dow Jones(.DJI)$

Key point:  16-years on from one of the best buying opportunities in history, investors in US assets now face one of the worst risk setups in recent decades.

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