In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
A Quarter Century of Sideways
We like to use the Value Line Geometric Index as a representation of how the average, or median stock is making out. While the S&P might be a better illustration of the performance of an average portfolio, the Value Line shows us the performance of the average stock.
With prices cratering back beneath key prior-cycle highs, it’s not painting a very bullish picture for the broader market. These dot-com bubble and financial crisis highs ~510 are as important as any level in the stock market right now. If we’re below there, downside risks are elevated, and we’re on the sidelines. The fact that the median stock price has made zero progress since its 1998 peak almost 25-years ago tells you all you need to know about the damage the overall market has already endured. As long as VLG is below these former highs, we want to be prepared for more to come.
