It may turn out to be a year bottom in nominal terms. How does the picture look compared to the bottom?

I started the chart 6 months prior to the bottom and, in addition, the line is scaled so that the bottom aligns with the bottom. As usual, click on image for a bigger picture. Price Performance The rally is considered to be the biggest stock market rally in American history do note that the numbers can vary slightly if you use a different index, such as the DJIA. As you can see, the current rally from the bottom is almost as powerful and ranks as the 2nd biggest rally in history.

Interestingly, both, the bottom and the bottom, appear to be set in April. After a little over an year from the bottom, the current rally is approaching the returns posted by the rally. If the current rally continues, it will surpass the rally pretty soon. Valuations The next question is valuation.

Both rallies appear to be similar but it would make a big difference if one is off a lower valuation. For reference purposes, I have reproduced them below: But it's hard to say for sure.

The march CAPE was When interest rates are low i. Having said all that, there is one indicator that clearly flags the fact that stocks were much cheaper in So, overall, stocks were cheaper at the bottom in than in The bottom is very confusing given the huge bank write-offs—some of those losses may reverse—but it wasn't very cheap.

As for the present i. In my mind, there is no question that the current valuation is very high compared to the April valuation. In fact, it appears that the current rally has been so great that stocks have become overvalued so quickly from a major bottom. It's amazing that the CAPE, which is a 10 year average and hence doesn't usually move much in an year, has gone from This is especially important given that the present interest rate of 3.

If the current rally continues for a bit longer, it will surpass the rally. Valuations looked low, although not exceptionally low, during the bottom but they have risen significantly in the last year.

The increase in valuation contrasts with the rally, which didn't see valuations rise quite as much.

Ford Coupe Stock Images, Royalty-Free Images & Vectors | Shutterstock

The current valuation appears to indicate that the market is nowhere near cheap. A CAPE of 22 is in the upper range of the historical data. Future returns are likely to be low unless earnings rebound. If earnings can rebound strongly from here, the situation wouldn't be so bad. Given how I'm expecting corporate taxes to go up and a greater share of economic profits to go to workers, I don't think we'll see significant increase in earnings.

Stock Price - Sysken Corp. Stock Quote (Japan: Tokyo) - MarketWatch

But there is one hope. That hope is that bank write-downs of questionable assets start reversing. If financial institutions can start writing up the assets they wrote down in the last couple of years, the situation would improve. So far, bonds, particularly junk bonds, have recovered strongly; but mortgage bonds and consumer loans still appear weak.

I was expecting to see strong deflation in the period but that was not the case at all. In fact, inflation from the bottom to April was higher than from the bottom to April The rally from March to April posted a Thinking more, I guess I shouldn't have been surprised.

After all, the gold exchange standard was removed and that probably played the main role in jump starting the economy. I personally don't buy that argument and think dividend yields can be compared across time.

There is some merit to that view on its own. However, if you are comparing to that clearly doesn't mean much, given how also had a poor economic environment with possibly low earnings and weak dividend payouts.

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Mostly contrarian investing with value-investing tilt and influenced by macroeconomics. Feel free to visit my non-investment blog describing my life and thoughts. About Me Sivaram Velauthapillai View my complete profile. Stock market performance from two bottoms - vs April 25, at 6: Newer Post Older Post Home.