Will Stocks Collapse 24% In The Next 3 Months?
Phoenix Capital Research | Apr 26, 2016 09:31AM ET
Will stocks collapse 24% (a Crash) in the next three months?
For the first time since the 2009 bottom, Earnings Per Share (EPS) have diverged sharply to the downside from stocks.
There are a lot of reasons why investors buy stocks… but at the end of the day, they all boil down to earnings: the company is only a sound investment if it actually makes money.
The above chart shows us that earnings recently peaked and have diverged sharply from stock prices. Here’s a close up of the SPX over the last three years:
By this analysis, stocks could easily fall to 1600 to return to a proper valuation. That is 24% below current levels and would qualify for a crash.
The time to prepare for this bubble to burst is now. Imagine if you’d prepared for the 2008 Crash back in late 2007? We did, and our clients made triple digit returns when the markets imploded.
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