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Editor’s Note: Tim just released his latest video on the assumptions that are holding this market rally up, how they could come tumbling down, and where to put your money to profit regardless. He also details the new “Hyper-Accumulation” small-cap momentum portfolio, which delivers options-like returns with much lower risk. For instant access to the Hyper-Accumulation Portfolio, as well as the video and full transcript below, upgrade to Premium.
Welcome to this week's Real Income Report. I'm Tim Melvin, and it's no secret that I'm not particularly excited about current conditions in the overall stock market, especially those large-cap tech stocks that keep leading us higher.
Valuation is extremely extended at 28 times trailing earnings and over 21 times forecasted earnings. That level is extremely high by all historical measures. The CAPE ratio sits at thirty-five. None of this serves as a precise timing device, and markets can remain overvalued for extended periods. However, I had a conversation earlier today where someone noted that valuation really is the only concern. At this moment, there's some truth to that observation. We weathered all the madness surrounding Liberation Day back in early April. The markets have fully recovered from that event. We're pushing to make new highs and sitting very close to them.
The Dangerous Assumptions Baked Into Current Prices
The market is currently pricing in several assumptions as accepted fact. Any deviation from these could have devastating consequences for the broader market:
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