Is this stock market getting overpriced? By some measures, it may be getting a little pricey. The most common measure used for stocks is price-to-earnings ratio, of course, and that has been creeping up lately. The S&P now trades at 14.4 times its expected earnings, up from 13.5 earlier in the year. The current P/E ratio is the highest it's been since 2010.
Then again, the P/E ratio for the S&P 500 was significantly higher in 2010. At the beginning of that year, it ticked over 17. And of course, the market was just at the beginning of a multi-year bull run that has continued to this day.
Within that narrow band of movement, between 13 and 17, it's likely that the P/E ratio doesn't serve as a strong indicator either way. You can see that fact in evidence by looking at the price-to-earnings ratios from 2007, just before the market began plunging. At that point, P/E ratios gave no indication that the market was headed for a fall.
No comments:
Post a Comment