Today we show that 76.2% of all stocks are overvalued 42.4% by 20% or more. 15 of 16 sectors are overvalued 13 by double-digit percentages, of which eight are overvalued by 21% to 30.9%. Sector price-to-earnings ratios have become elevated between readings of 17.2 to 29.9.
Stock market strength has been artificially propped up by the Federal Reserve's monetary policy of a 0% to 0.25% federal funds rate since Dec. 16, 2008, nearly five years ago. On Sept. 13, 2012 the Fed launched QE3, the purchase of $40 billion a month of agency mortgage-backed securities. On Dec. 12, 2012, the Fed added QE4, the purchase of $45 billion a month of longer maturity U.S. Treasury notes and bonds. These policies have failed and the stock market has become vulnerable to what I call 'QE-Fatigue'.
The purpose of quantitative easing was to lower mortgage rates, but instead the 30-Year fixed rate mortgage is more than 100 basis points higher than before QE3 and QE4 were implemented.(CSCO) ($23.31) has recently been upgraded to buy from hold after declining from a multi-year high at $26.48 on Aug. 13. Annual and semiannual value levels are $22.76 and $22.39 with quarterly and monthly risky levels at $24.44 and $25.66.
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