As every savvy investor knows, multiples are one of the best yardsticks when it comes to finding undervalued stocks.
More often than not, that involves a hard look at the multiple of a company’s earnings to determine whether or not a stock is fairly valued.
Yesterday afternoon, after much gnashing of teeth, the Fed finally revealed its long awaited taper plans…
And the DOW jumped by almost 300 points.
Now, the taper itself is small to start – just a $10 billion reduction for the month of January. But the announcement was coupled with a pledge to keep the fed funds rate at zero beyond the 6.5% unemployment threshold.
As a result, two things collided in the last 90 minutes of yesterday’s trade: A clear indication that the economic recovery was strengthening and a classic “short squeeze,” which merely added fuel to the fire.
As we approach the end of the year, that means the “Santa Claus rally” may have a bit longer to run
But longer-term, the market is now faced with less artificial stimulus next year and a gradual return to a market where direct pressures influence its direction.
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