Iíve been studying up on this a little, and it appears that during most recessions, the TTM PE falls to 10 or below. In 2008, the market fell 57% from the high. Other big recessionary drops were 40%+. This one just happens to be happening very quickly, not prolonged over many months/years.
If that were to hold true here, then the S&P 500 should fall to 1690 or below based on the TTM PE, or 1450 based on the percentage drop equivalent to 2008. Today itís at 2304. From the high, it is only down 32%. A further drop from the high of 20-25% is not out of the question.
Now, from current price, that would be a further drop of 27-37%. Last week alone the drop was 15%. This coming week could easily be the same.
Whether it gets that low, who knows. But I think we have a ways to go as in many cases, we are still only down to where we were 2-3 years ago. This also could just be a short flat spot before the next leg down.
On the flip side, if the virus falls off, a vaccine comes out quickly, or some other magic happens, it could turn around. But then I suspect it gets hammered again when the quarterly reports and estimates come out showing the job losses, revenue losses, etc.
I just see more downside potential than upside potential right now.
Remember, it goes up like an escalator, and comes down like an elevator.
Agreed. The market has been inflated for 3+ years and is now about where it should have been all along.