The post-election stock market rally is officially over. After hovering near record highs for the past couple of weeks, U.S. stocks had their worst day in six months on Tuesday. For quite some time it has been clear that the momentum of the post-election rally had been exhausted, and a pullback of this nature was widely anticipated. But even though stocks fell by more than 1 percent during a single trading session for the first time since last September, it is going to take a whole lot more than that to bring stock prices back into balance. In fact, stocks are so overvalued at this point that it would take a total decline of about 40 to 50 percent before key stock valuation measures return to their long-term averages.
So we are still in a giant stock market bubble. All Tuesday did was shave about one percent off of that bubble.
Let’s review some of the numbers from the carnage that we witnessed…
-The Dow was down 237.85 points (1.14 percent)
-The S&P 500 was down 1.2 percent on the day
-The Nasdaq was down 1.8 percent at the closing bell
-Financial stocks were down more than 2.5 percent
-Overall, it was the worst day for banking stocks since the Brexit vote
-Bank of America is now down more than 10 percent since Trump’s speech to Congress
-The Russell 2000 (small-cap stocks) dropped about 2 percent
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