This chart tracks the P/E ratio of the U.S. stock market going back 120 years. Note how valuations have oscillated around the mean (the horizontal black line). They’ve been moving between overbought and oversold.

Since 2010, it spent eight years backtracking in a countertrend rally… eight long years of fake money and rising stocks… before reversing course once again and resuming its downward trend in late 2018 (you can see this downtick near the right-hand-side of the chart).

Overall, stocks were relatively expensive before the economy was closed. Since the outbreak of the coronavirus pandemic, the government has gone into hyperdrive trying to “manage” the economy – with more financial engineering, more unsound money, bigger deficits, and more soothing words…

And the market has raced upwards…

Guest blog, Jeff W