Markets Worry More

It appears that equity markets are beginning to worry more about the debt ceiling – at least yesterday they sold off and today is showing softness in the futures markets. Honestly equity markets seem to be very over values based on historical price/earnings so I wouldn’t be surprised to see a sell-off simply because of valuation–a 23 p/e is pretty pricey on a historical basis.

Looks like interest rates are treading water — now at 3.67%–it will be interesting to watch rates in the next few days as the debt ceiling is debated by every talking head.

Today we have little economic news until 1 pm (central) when the FOMC meeting minutes for May are released–while this is old news really markets almost always react one way or the other (or more likely in both directions–spiking up and spiking down). I guess we may see more ‘color’ around future interest rate hikes in the minutes which may or may not be helpful. Right now I am in the no hike camp for June–but with plenty of data yet to come in before the mid-June meeting who knows. We will have the personal consumption expenditures come in for April on Friday and that will weigh heavily on the FOMC decision.

I see once again PacWest Bancorp (PACW) is selling more assets – their Civic Financial real estate lending business. This regional bank seems pretty damned determined to ‘right the ship’–they just sold a $2.7 billion portfolio of real estate loans for $2.4 billion so no doubt their financials for the current quarter will look lousy as they will likely be taking some pretty large write downs.

So let’s get another exciting day going!!!

4 thoughts on “Markets Worry More”

  1. 15 Trillion in fiscal stimulus over the past 15 years, combined with near zero fund rates drove investors to equities, and juiced earnings. This “stimulus put” is not coming back and P/E ratios should move lower as investors shift some $ from equities to fixed, and earnings come down to earth. Back to more “normal”

    Cheers! WIndy

  2. The news does nothing but amplify the worry on the street about the debt talks. Hard to ignore the noise and focus on what is meaningful. Still, I bought both UBP H & K this morning. I am looking for the income and if they get called after the buyout I pickup a few pennies.

  3. Tim

    I read and hear a lot of comparisons of P/E ratio’s to historical averages. These averages may include data from fifty years ago. Demographically, the US and the West are not the same economies as fifty or even 20 years ago. We now depend on migration for population growth, our people are aging and the ratio of working to non working is climbing. Add in our fiscal swamp and a P/E of 23 seems not just high but absurd.

    We need a way to adjust P/E for economic growth prospects for historical comparisons to be reliable. No, I haven’t a clue how to do that!

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