Though the S&P 500 has tumbled more than 20% this year, Warren Buffett-owned Berkshire Hathaway Group has generally avoided buying U.S. stocks. Paul Ciampa, a professor of fixed income at Boston College, pointed out on Friday (11) that with According to the Buffett indicator and other indicators, the current environment is still unfavorable for value investors.
Since 2020, the size of Berkshire’s cash reserves has hovered at the high end. Berkshire’s cash reserves in the third quarter (as of the end of September this year) were $109 billion, compared with $105.4 billion second quarter dollars.In other words, with stock valuations still high, despite this year’s S&P 500 andNasdaqThe index collapsed and Buffett, who was cash-strapped, found almost no targets of interest.
The ‘Buffett Index’, known as the ‘big markets thermometer’, climbed 155.22% on Friday, a leading indicator used by analysts to gauge the current financial market gross.
Buffett once said that when the index falls between 70% and 80%, the stock market is undervalued. Right now is a good time to buy stocks. If it exceeds 120%, the stock market is overvalued. Buffett may have lowered this threshold as the overall valuation of US stocks soared, but economist Ciampa believes US stocks can’t be overvalued just yet.
Although the US stock market has entered a bear market this year and shocked the market, US stocks are basically not in the so-called value zone.
The price to book ratio (PBR) of the S&P index is still 3.8 times, whileNasdaq The price/book value ratio of the 100 index has reached 5.8 times. Fair value implied by the Gordon Dividend Growth Model, assuming cumulative dividends for components of S&P totaling approximately $64 per share over the next 12 months, assuming a 7% stock yield and a 5% growth rate, S&P should be of about 3,200.
The construction of the Gordon model is to use the dividend valuation model and use the dividend discount method to measure the stock price of the current company, i.e. the stock price of the current company should be equal to the discounted sum of all possible future dividends, i.e., the net present value (NPV, Net Present Value).
Furthermore, according to the S&P’s long-term trend analysis, the S&P will fall about 7.1% for every 4-yard hike in the federal funds rate.Nasdaq The 100 index will drop by 9.6%.
Since the Federal Reserve has raised interest rates 15 meters this year, Federal Reserve Chairman Jerome Powell has even hinted that the cycle of rate hikes will continue until early next year (2023), when rates interest rates will rise more than 5%, which means that the recent rapid rebound in US equities is likely It is short-lived and there is still a long way to go before the US stock market plunges.
Nasdaq The 100 index closed up 1.82% at 11,817.01 points on Friday, and is still down 28.39% this year.S&P 500 indexIt finished up 0.92% at 3,992.93 points and is down 16.75% so far this year.
