Rosenberg Daily - Market has discounted 3 yrs of recovery

Despite the temptation to jump into a “liquidity-induced” rally, and these rallies can often take you to heights that you can never imagine we would get to, they cannot be sustained without a durable organic economic expansion. The problem is that the global economy in general, and the U.S. economy in particular, is operating on so much medication that it is difficult to conduct an appropriate examination of the patient at the current time. All we know is that the markets seem to have very rapidly now priced in three years worth of recovery...

The S&P 500 is now up more than 60% from the lows, which is truly amazing and kudos to those who called it. But the question is whether the fundamentals will ever catch up to this level of valuation — usually after a 60% rally, we are fully entrenched in the next business cycle. Never before have we seen the stock market rise so much off a low over such a short time period, and usually at this state, the economy has already created over one million new jobs — during this extremely flashy move, the U.S. has shed 2.5 million jobs (as may as were lost in the entire 2001 recession)...

In any event, it’s not even worthwhile debating the economic outlook at this juncture. It’s about how much good news is already being discounted in the equity market, and believe it or not, there is more good news being priced in today than there was bad news being discounted back at the March lows. This is an overbought and overpriced equity market and we remain of the view that there is too much risk and too much growth being discounted to be a full participant.

---Rosenberg - 9.18