While heartened by the bounce in oil prices after the multi-decade lows reached early in the year, any significant further rally in energy prices would seem to us to require a far more vibrant global economy. As the IMF’s (and the Fed’s) relatively subdued outlooks make clear, it is hard to anticipate such a scenario occurring anytime soon.
We face a modest week for economic data. While equity markets remain open, bonds will not trade on Monday (Columbus Day). Yom Kippur begins Tuesday at sundown and extends through the next day.
Today, let’s take a look at the most recent market valuations. Hint and not a surprise: both stocks and bonds remain expensively priced. Value? Not today. Especially in the bond market.
With all that is happening in the world – the U.S. election, the Brexit vote, various terrorist incidents, speculation about will she or won’t she raise rates at the Fed and other concerns – oil seems to have been pushed down the priority scale of market-influencing issues.
October could see a ramping up of volatility across all asset markets. The month is notorious on Wall Street for the 1987 stock market crash. Fall crashes also occurred in 2002 and 2008.
Conventional wisdom dictates that equity markets adhere to long-term secular cycles and that investors should adjust their allocations based on whether valuation metrics, such as the Shiller CAPE, are relatively high or low. But what if the notion of secular market cycles is misguided because, for example, the sample size of past cycles is insufficient to attach any statistical significance?
