Analyzing The Risk Of Stocks After The 6.9% Drop
In light of recent volatility, we thought it would be wise to remember that, ultimately, corporate profits drive stock prices, and that profit levels currently indicate stocks are trading within their normal historical price range.
Okay! That’s a lot to unpack. Let’s go!
The black line shows the daily price history of the S&P 500 index since 1990, while the solid red lines represent the upper and lower bands of valuations placed on stocks.
The gap between the two red lines shows the range stocks would have stayed within if they always had been priced fairly.
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