From my broker, based on Goldman research: One notable feature of this yearâs 25% rally in the S&P 500 has been its broad-based nature. 446 constituent stocks are up year-to-date, the highest number since 1980, of which 220 are up more than 30%. Whilst past stock markets bubbles have been characterised by fashionable sectors rising to ludicrous valuations, such as during the dot-com rally of 2000, current valuations are spread evenly across the market. At the peak of the curve in 2000, frothy dot com stocks meant that valuations within the index were widely dispersed from the average. At the current point in the curve, valuations are more tightly bunched around the average than at any time since 1990. As such, the current market value can be interpreted as the most broad-based in 23 years. A broad-based market doesnât necessarily offer any insight as to whether current valuations are high or low, however. What it says is that there is less differentiation of companies based on valuation, such that companies with different growth forecasts are being valued with similar multiples. As such, either growth stocks are undervalued, or value stocks are overvalued. Whatever the case, the tightly clustered valuations of todayâs market makes it an ideal hunting ground for single name stock-pickers.
Market is running on the premise, "Fed pump trumps everything". Likely will continue higher until either Fed changes course or something alters that perception.
Correct but the premise is imposed by the media. There is no direct causality between QE and stocks rallying. Maybe for bonds but not for stocks.
Of course there is. In order for risk assets to get bid there has to be enough liquidity in the marketplace. That's what entices people to "take risks". It's the construct of knowing you can "get out". The FED "is" providing liquidity and that lifts risk assets. Also, by driving rates lower or holding them lower, the market realizes that sooner or later you will have inflation. This means there is a huge economic cost to holding cash and bonds. The only protection against that inflation is to be long assets that benefit from inflation such as stocks. If you want "empirical" evidence of my assertion look no further then Japan, whose central bank is currently the most aggressive in expanding the money supply and whose stocks market is having the best year.