With stock valuations high and the market chatter nervously fixated on the great tapering debate, the bears claimed victory today with the S&P off 1.6% and the Dow down 170 points.
The impact of Central Bank liquidity has undeniably resulted in lofty stock valuations given the economic backdrop, as the graph of the historical Shiller PE ratio below illustrates.
September is commonly viewed as the month when investors and traders, upon their return from sunning themselves, get nervous about year end results (read bonuses) and start to take money off the table. The statistics back this up as the graphs below on historical S&P 500 monthly returns illustrates.
So, today looks to me like the possible opening salvo for a September bear party. I wouldn’t get too worried though, despite the musings from Jackson Hole there is always a Central Bank around to scare the naughty bears away if they overstay their welcome.