One of the few bits of good financial news we've gotten in recent weeks has been the recovery of the stock market. Here's the downside of that: U.S. stocks are trading at pricier valuations relative to corporate profits than at any point since the dot-com bubble in 2000.
As S&P 500 index firms continue to report first-quarter earnings, managements have often declined to provide guidance on future performance, given the uncertainty the coronavirus pandemic has created. Such an environment has allowed the large-cap index to trade at more than 22 times expected 12-month earnings, a level not seen in roughly 20 years, according to FactSet.
RBC Capital Markets predicts 2021 earnings will ultimately come in at $153 per share for the S&P 500. At $153 per share, that would leave the S&P 500 trading at roughly 18.8 times 2021 earnings, well above the five-year average of 16.7 and the ten-year average of 15.
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