Price to Sales Ratio for S&P 500 Surpasses 2000 Tech Bubble Peak

Originally published at The Boock Report

At the individual investor level there is certainly a lot of excitement heading into the new year. AAII said Bulls rose to 59.8 from 52.7 last week. That is the highest level since December 2010. Bears are nowhere to be found, falling to 15.6 from 20.6 and that is the least amount since November 2014 by .5 pt. Another drop by more than .5 pt would put the bears at the smallest amount since July 2005.

I've said before that I don't care much for this sentiment indicator because it is so volatile but when it gets to an extreme like it is today, we must take note that the bullish sentiment is certainly euphoric. This comes as the weekly II data has never had a weekly stretch this long of Bulls above 60 in its 50-year history.


Along with the excitement with global growth and equities, the US 2 yr yield is at a fresh 9 1/2 yr high at 1.96%. This rise in yields and ebullience in market sentiment comes along with the price to sales ratio in the S&P 500 that is now above its March 2000 peak.


Ahead of the US services PMI from Markit today, we saw a slew of them overseas. The private sector weighted Caixin services index rose 2 pts to 53.9. New orders rose to the best since May 2015 while job growth was little changed and "moderate." Price pressures continued to build: "Average input costs faced by service companies in China increased at a solid and accelerated rate in December. Furthermore, the rate of inflation was the quickest since February 2013. Raw materials, transportation and salaries were all cited as having gone up in price in the latest survey period."

Hong Kong's PMI rose .8 pt to 51.5 but Singapore's fell by 3.3 pts. India's got back above 50 at 50.9 from 48.5.

The final read on Eurozone services was about the same as the preliminary at 56.6 which brings the manufacturing and services composite index at 58.1, the highest since early 2011. Ireland was a particular outperformer. On the inflation side for services, "Input price pressures increased in December, with the rate of cost inflation the highest for 6 1/2 years. Part of the rise was passed on to clients in the form of higher service charges. However, the pace of output price inflation eased for the first time in 6 months. Increases in charges were signalled in almost all of the nations covered, the exception being Italy."

The UK services PMI improved a touch to 54.2 from 53.8 but new orders and employment fell. Inflation pressures remained intense: "service providers indicated another marked increase in their average prices charged, which was overwhelmingly linked to strong cost pressures. Survey respondents signalled the fastest rise in operating expenses for 3 months, reflecting higher transportation costs, staff salaries and utility bills in December." Bond yields are moving higher in the UK with the 2 yr in particular back above .50%.

About the Author