We have a 10 per cent correction in hand. Before the sell-off, the S&P500 traded at 16.6X forward earnings. It trades at 15X times now. The 10-year average is 14.1.
What that tells us is that for this correction to be over, we have to see annual earnings estimates for the S&P500 stocks rise. Since the Fed did not hike rates, that ebullient thesis is not looking too solid. That leaves a volatile sideways market in play, or sadly, another 10% leg down in this correction to the historical average of S&P500 valuations, or even lower. It's not all bad news, but more weight placed on sideways and negative scenarios leaves the fear in this markets at a very high level. Hence, I think this S&P500 correction is sideways or lower for the time being.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.