The die-hard bulls keep hanging on. They try to convince themselves that the worst is over for the stock market. They say companies are beating expectations -- but that's easy to do when expectations are lower and lower every quarter. When you look at these earnings compared to a year ago, however, the economic outlook is grim.
Plus, stocks are still overvalued. The Dow has a P/E ratio of 27, and the S&P 500 has a P/E of 30 -- well above historic averages. In addition, the massive number of personal and corporate bankruptcies continues to put a heavy strain on the stock markets.
And don't look to the government for help. It has enough problems of its own. The federal government currently has $32 trillion in debt -- three times the nation's GDP. If deficit spending continues, the government will have to borrow more money and interest rates will surge. That will strangle business investment even more, and could put the brakes on the booming real estate market.
The bottom line is that while some investors want to believe that the market may have slightly more upside potential over the near term, the current "risk versus reward" does not justify new buying.