No. of Recommendations: 14
It could down 30%, then rally 8%, and then go down another 20%.
It could do all that a number of times.
Say one considers "cheap" to be the 20th percentile of trend real earnings yield since 1990. i.e., things were cheaper than that 20% of the time, and more expensive 80% of the time.
At that cheapness boundary, the S&P would be at 3245 today after inflation, down 35% from here.
At the valuation level of the 2009 lows it would be at 1866, down 63%.
At the lows of 1982 it would be at 1017, down 80%.
We know all of those situations are possible because they already happened. Prices can do anything for a while, and often for longer than you might imagine.
Jim
