Six months have passed since the S&P 500 index touched its lowest level in more than two years after shedding about 25% of its value at the nadir of 2022’s bear market.
However, investors still have plenty of reason to fear that the worst has yet to arrive, if history is any guide, according to Warren Pies, the founder of research shop 3Fourteen Research. Earnings expectations continue to fall Earnings expectations for S&P 500 companies are a key metric for investors, since they are used to calculate the market’s forward price-to-earnings ratio, which is one of the most popular valuation metrics used by investment analysts.
The forward 12-month P/E ratio for the S&P 500 stands at 18.15 as of Wednesday, according to FactSet data. That’s below the five-year average of 18.5 but it remains above the 10-year average of 17.3. 3Fourteen added that “typically, IG spreads and stocks move together. However, when spreads blow out while stocks are up , stocks suffer badly in the next 12 months,” they said.