Over my morning coffee I read an interesting article on CNN Money that helps put recent market gyrations (from a US point of view) in perspective:
- Banks and individuals have a lot less debt and a lot more cash on hand than they did heading into 2008. Companies too are sitting on over $1 trillion of cash. (Maybe Canadian consumers have more debt than before…)
- The S&P 500 is now trading at 15.6 times forward earnings, according to S&P Capital IQ. That’s cheaper than the 15-year average. (Seems a little more reasonably priced than it has been until recently.)
- The average investor is down about 9% so far this year, according to Openfolio. (Ouch, that stings if you’re not thinking long term; the market is reportedly up 200% since the financial crisis…)
- It’s also telling that as investors have been fleeing stocks, they have been purchasing more bonds than gold. Typically, when investors fear the worst, they pour into gold.
- China is sitting on its own massive pile of cash. (I doubt China will sit idly by and watch things tank. It will do whatever it takes to try to prevent that.)
- But… central banks can’t provide as big of a life jacket. (This is a bit worrying, but in Canada, fiscal stimulus may be a more direct route to job creation anyway.)
So, while the picture is not rosy, it is nowhere near bleak.