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Stocks Will Be Cheap When the S&P 500 Tumbles 25% Says Portfolio Manager

There’s an old saying about lousy stocks on Wall Street: “If you liked XYZ at $50, you must love it at $25.” Along those same lines, it could be argued that if you think stocks are cheap now, just wait until you see how cheap they are when earnings estimates come down.

According to Mike Mullaney, portfolio manager at Fiduciary Trust, earnings estimates for next year have to come down another 15% before stocks should be considered cheap.

“It’s not pretty, 925 (on the S&P 500) is kind of the going rate on a worse case scenario among strategists if we do go into a recession period,” Mullaney says in the attached clip. “Most likely there will be blood in the water at that point in time, and most likely that would be a good entry point.”

Mullaney won’t consider the market cheap until he sees 25-30% drop in the S&P pushing it to levels not seen since mid-2009. But he’s not suggesting that stocks are expensive on a historical basis because 12-times estimated earnings is far cheaper than the long term averages.

Read the whole article here…

So are we here yet? It goes in hand with my expectation that the market recovered too fast and too quickly in 2009 – 2010 compared to economy, so now we are in correction of such run. We may go that far down or even lower and it is not a recession as many are trying to say, it is just a correction of too wild recovery not supported by economy, which is still a bit lousy.

Happy Trading

4 responses to “Stocks Will Be Cheap When the S&P 500 Tumbles 25% Says Portfolio Manager”

  1. Pierot says:

    Do you think S&P 500 will drop another 25%??

  2. Mike says:

    Hello Blogger! Great investing ideas! will the market go down more or are we in an uptrend?

  3. Becky says:

    I do not think the market will slide another 25%. We may see some choppiness, but not that huge decline anymore.

  4. Matthew C. Kriner says:

    Intersting read about stock market‘s future, passing this to a friend who was looking into something similar.

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