NEW YORK - Stock valuations have climbed to levels reached just before Wall Street’s late 2018 plunge, leaving the market at risk of shocks such as the sell-off this week as global trade tensions mounted.
The forward P/E for the index, which compares stock prices to estimated earnings over the next year, had climbed recently to 17 times, making the index about 13% more expensive than its historic average, according to more than 30 years of data tracked by Refinitiv. As of Friday’s close, the S&P 500 was about 2.2% below its all-time high close, which in turn reduced the forward P/E multiple on the S&P 500 to nearly 16.8 times, still well above the historic average of 15.1 times. On Friday, the S&P 500 rose 0.4%.
“The biggest difference is the pivot by the Fed,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “In a low interest-rate environment, if that persists, you can have higher multiples because you have more demand because you can’t make any money anywhere else other than equities. It’s the classic risk-on ”
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Pay at your own risk Don’t buy high. The low is coming Expect the economy to tank. Stocks are artificially high because CORPS have bought back their own stocks with the GOPTaxScam$ Only saving grace is that they also bought high. Remember 2008-2009. And there wasn’t a tariff war
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