Investors have seen $806 billion erased from the value of American equities since President Barack Obama was re-elected Nov. 6 in the biggest decline since May. The combination of falling stocks and rising profits as the economy recovers has left the S&P 500’s price-earnings ratio below the ending level of eight of the nine bull markets since 1962 and beneath the average of any since Ronald Reagan was in power.
Bears say the 4.8 percent drop in the S&P 500 and valuations show investors are losing confidence that Congress and Obama will reach a budget compromise that would keep the recovery from stalling. Bulls, including the top strategists at six Wall Street firms, say that the declines are another reason to buy and that stock prices from Apple Inc. (AAPL) to Dollar Tree Inc. are bound to improve as earnings increase.
“The stock market looks cheap because people are way too pessimistic about what growth looks like for the next 10 years,” said Brian Jacobsen, who helps oversee $208 billion as chief strategist at Wells Fargo Advantage Funds and predicts the S&P 500 will rise 47 percent to 2,000 in 2014. “You can get big and rapid moves in the market when expectations are so low.”
http://www.bloomberg.com/news/2012-11-18/s-p-500-in-cheapest-bull-market-since-reagan-trade-26-from-peak.html
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