DM Monthly Report – Feb 2021

The Stock Market is Dangerously Expensive – OR IS IT? – The market’s almost unrelenting ascent from its spring 2020 low has raised concern that stock prices have become precariously disconnected from fundamentals and are being buoyed primarily by the tsunami of liquidity unleashed by fiscal and monetary authorities. To be sure, the S&P 500 has rarely been as expensive as it is right now when judged by the commonly referenced price/earnings ratio; if cash flow is used as the yardstick, though, equity valuation doesn’t appear to be particularly stretched against where it’s tended to reside over the past 30 years.

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