That would be worth keeping in mind at any time, of course, but especially now with the major market averages significantly off their late-April peaks. If current valuations were reasonable, then we could count on them to provide a safety net below this market.
I disagree. Though valuations did improve between the market’s late-September and late-April peaks, the improvement was so slight as to barely improve equities’ outlook. Consider perhaps the most popular valuation measure: The price/earnings ratio. At the S&P 500’s late-September peak, the P/E ratio based on trailing 12 months as-reported earnings stood at 22.5. At its late-April peak, in contrast, it stood at 21.9 — less than 3% lower.
Notice that the market at that high was more overvalued than it was at anywhere between 86% and 100% of past bull market peaks . The overwhelming message: Don’t look to valuations to cushion any decline.
MktwHulbert Sorry, that dog won’t hunt.
MktwHulbert you guys seem very desperate for clicks...sorry advertising money has gone away...