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When policies are anti-growth, sell the rallies and buy the dips

The equity markets are generally forward-looking. That ‘s why you have price movements that seem incompatible with the latest economic (backward-looking) data. The equity market today, as seen through the eyes of the S&P 500, has been flirting with all-time highs while the economic data indicate that the economy continues on feeble legs. So, just as the “forward-looking” market has predicted 25 of the last 8 recessions, so too, it can send false signals as to the future economic growth path. Today, the S&P 500’ s forward P/E ratio is 19x (18x on a trailing basis) —

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