2,300 Tuesday – Is the Russell out of Gas?

No progress since February.

That’s where the Russell is (or isn’t) after the first half of 2021 has come to a close.  That’s OK because, before that, the Russell had gone nowhere since 2018 but then it dropped 600 (37.5%) and now it’s 700 (43.75%) points higher than where it had been steady before.  

With 2020 earnings being negative, the CAPE (earnings over 10 years) of the Russell 2000 is still well below the 2018 high of 130, hovering around 120 but we’re paying 43% more than we did then, when the P/E ratio for the Russell was 83.05.  The means the current P/E for the Russell is around 100 times earnings and we KNOW, for a FACT, that the Government and the Fed have spent over $10Tn (50% of our GDP) in the past 18 months – just to give us that 43%.  We don’t know, for a fact, that they will ever stop spending and average of $600Bn/month to prop up the economy and, if so, then maybe paying 100x earnings isn’t so crazy but, if they do ever stop….

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Provided courtesy of Phil’s Stock World.