The Stock Market Is Overvalued and Will Drop

With the recent tax bill resulting in a deficit of over $1.5 trillion and the end of quantitative easing, more Treasury bonds will need to be sold and foreign buyers are not willing to invest in such bonds without an increase in rates.

The only times the S&P 500 PE ratio has been over 25 in its history is shortly after a market collapse. This means that the market is very vulnerable.

A weakening dollar could increase stock prices by making American goods more attractive and therefore helping American companies. However, the weakening dollar will also require higher interest rates from bond investors hurting businesses.