Barry Ritholz also showed, in a separate post from his secular bear post, a much longer history of this ratio that goes back to 1925 from Bianco Research. However, levels of inventory are seen with respect to “Cost of Goods Sold” (inventory turnover ratio) and not in absolute terms, as an expanding business will naturally require higher absolute levels of inventory. Indeed, Warren Buffett uses a similar ratio of Market Cap to GNP as a valuation measure for boutiques s. Markets square measure additional risky within the short term. Secular bulls have historically begun when this measure has been depressed. Last but not least, the bulls have to contend with the seasonal patterns seen in past Presidential cycles. According to LPL Financial, history suggests stocks will rise further by year-end 2021, given the rally seen in the final months of this year. 24.77% per year. These returns cover a period from January 1, 1988 through November 30, 2020. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. It happened during the stock market bubble of the late 90′s, but then occurred again just briefly during the 2006-2007 period when the valuation broke the 100% range in Q3 2006 and stayed above that range for about a year.
These figures are absolutely amazing and should help the stock trade above $260 after it reopens in my opinion. The above chart of Market Cap to GDP only goes back to 1950, in which we have only had one episode of a secular bear, or sideways market. Consider this chart of the relative performance of the financials against the market. See the chart below for historical reference. While the logical course of action may be to buy cyclically exposed stocks and industries such as the Materials sector which seems to be staging a bottom (see Time to buy gold and commodity stocks), here is an even Darker suggestion. Of course as the weight builds, so do the medical problems. Market Cap to GDP, shown on the top panel, remains elevated relative to its own history. Market Cap to GDP remains highly elevated relative to its own history. That, of course, is the Wilshire 5,000 total market cap index relative to GNP.