Broker Check

Assessing The Correction

| May 31, 2022

Chart Content: Rolling 12-month S&P 500 valuation based on realized earnings

Chart Significance: The recent volatility in the S&P 500 has resulted in valuation downside that remains three times (3x) the pace of that experienced during the technology bubble in the early 2000s. Such a quick pace to the current correction has provided a sobering reality that the technology heavy S&P 500 may have experienced a mini bubble burst. 

Potential Forward-Looking Implications: Further volatility within global capital markets remains possible and may be warranted in the event of unforeseen geopolitical events. The uncertainty of near-term inflation has also plagued sentiment as recent data indicates a fresh three-month low. Even with such events on the backdrop, however, the sustained health of U.S. consumers, along with a notably severe valuation downside to the S&P 500, there appears to be a tangible light at the end of the tunnel. It remains difficult to envision sustained downward volatility within a labor market backdrop that has failed to show signs of stress, as is the case with aggregate consumer demand for goods and services. This isn’t to say that it won’t happen, but we would argue that the probability has significantly diminished. It’s also exciting to note that valuation opportunities remain visible within all aspects of global equity markets. This has historically resulted in net new cash to enter equities.

Edison Byzyka, CFA – Chief Investment Officer – Credent Wealth Management

5/27/2022 Commentary


Investment advice offered through CX Institutional, a registered investment advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. The economic forecasts set forth in the presentation may not develop as predicted.

All other data, including returns, sourced from Bloomberg, through the release of monthly figures from the Department of Labor, U.S. Bureau of Labor Statistics, or from the Federal Reserve and any of its affiliated regional locations.