With many of the leading and lagging indicators coming just below expectations, it gives reason for the Fed to keep providing liquidity to the markets. The old adage “Don’t fight the Fed” was proven once again. The markets are trading at a price/earnings ratio of 16.5 times 2013, 15.4 times 2014 and 14.4 times 2015, which is above the historical average of 15 times earnings.
As we hit all-time highs again today, the financial media are starting to focus on “asset bubbles”. Asset bubbles can continue for a while, but bubbles do pop. We are not calling a top, but believe the markets are fully valued in the short term and would use caution for new asset purchases in the equity market.