Yes, Stocks Are Still Cheap

from Brian Wesbury

The S&P 500 fell almost 50% between mid-February and mid-March 2020, during the initial stages of the pandemic. It bottomed at roughly 2,224 during the nationwide strategy of shutting down for “15 days to slow the spread.” Because this was not a normal recession, and the market went into the shutdown undervalued, we believed stock prices would recover as business returned to more normal levels. By Thanksgiving 2020, even though the US economy was still producing less that it had pre-pandemic, the stock market had fully recovered and gone to new highs. On November 27, 2020, with the S&P 500 at 3,638, we set a year-end target for 2021 at 4,200, which was 15.4% higher. As of the close of trading on Friday, the S&P 500 was at 4,185, only 0.4% below our year-end target, with more than eight months to go before year end. Looking back, there are a number of things that pushed the market to this point. Technology and communication helped the world adjust to shutdowns, big box stores stayed open, the government disbursed trillions of borrowed dollars, a vaccine was invented in less than a year, the money supply exploded, and the Fed cut short-term interest rates to roughly zero and committed to keeping them there. Because of all this, profits have soared. To continue reading this report prepared by Brian Westbury and Robert Stein of First Trust Advisors, please click this link.