Why is the Market Not Trading on Fundamentals Lately?
Yes, many are frustrated because the market is just not making sense to them.
They have applied all the common matrices to the market, including P/E ratios, length of market rally, debt ratios, etc. And, no matter what matrix they apply, they all come to the same conclusion that, based upon fundamentals, the market is just not making any sense.
So, rather than consider the obvious conclusion, that fundamentals are not driving the market (God forbid one even consider such heresy), many would rather entertain perspectives of such outright conjecture as to relegate their perspectives to complete fantasy. You see, a significant number of people believe that the PPT (Plunge Protection Team) has been working overtime to “buy every dip.”
Now, in the past, I have presented my perspective as to why I believe that the PPT being able to stop market corrections is complete fantasy in and of itself. And, I use many specific market examples to prove my point.
Allow me to also remind you about the conclusion of one of the leading economists in the world today. In a paper written by Professor Hernan Cortes Douglas, former Luksic Scholar at Harvard University, former deputy research administrator at the World Bank, and former senior economist at the IMF, he noted the following regarding those engaged in “fundamental” analysis for predictive purposes:
“The historical data says that they cannot succeed; financial markets never collapse when things look bad. In fact, quite the contrary is true. Before contractions begin, macroeconomic flows always look fine. That is why the vast majority of economists always proclaim the economy to be in excellent health just before it swoons. Despite these failures, indeed despite repeating almost precisely those failures, economists have continued to pore over the same macroeconomic fundamentals for clues to the future.