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Valuation Ratios

Aug 05 2022

Valuations: Living Beyond One’s Means?

  • Aug 5, 2022

We won’t dispute that investors were not genuinely frightened at the June market lows, or that fears have evaporated following a 13% rally in the S&P 500. The distress is understandable: For 26 traumatizing days in 2022, our S&P 500 Normalized P/E multiple traded below its 1957-to-date top decile!

Oct 07 2020

The Valuation Case For “SMIDs”

  • Oct 7, 2020

Mid and Small Cap stocks underperformed in 2018 and 2019. However, after the collapse of February and March, these “SMID” Caps have largely kept pace with the torrid rebound in the blue chips. Today’s valuations are priming the SMIDs for a similar “decoupling” in the years ahead, like that following Y2K.

Oct 07 2020

A Fast Start Comes At A Big Price

  • Oct 7, 2020

The first up-leg of the bull market has catapulted many Large Cap valuations to levels seen only in 1999, 2000, 2019, and pre-pandemic 2020. At the six-month point on September 23rd, the S&P 500 P/E on 5-Yr. Normalized EPS had already reached 26.9x—a reading that is 30% higher than at the same point of any other bull market.

Sep 05 2020

Back To The Brink

  • Sep 5, 2020

Despite equal-weighted measures’ long-time underperformance, all valuation ratios we monitor for the median S&P 500 stock have returned to their top historical deciles. Even worse, our new equally-weighted “Valuation Composite,” based on these measures, closed August at a 98th percentile reading.

Mar 06 2020

Valuation “Reset?”

  • Mar 6, 2020

The massive performance dispersion of the past two years makes it difficult (if not hazardous) to draw a simple conclusion about U.S. stock market valuations. But it’s safe to say that cap-weighted indexes like the S&P 500 and S&P Industrial Index remained significantly overvalued at the low point of the February correction.

Dec 06 2019

Risks Still High In The “Median” Large Cap

  • Dec 6, 2019

The relative domination of Mega Caps might leave the impression that valuation of the “typical” (or median) Large Cap stock is reasonable. It’s not. The fall rally leaves all major valuation ratios for the median S&P 500 stock in the top decile of the 30-year history, and above the levels prevailing at the September 2018 market high.

Apr 05 2019

The P/E Decline Has Been Greatly Exaggerated

  • Apr 5, 2019

The S&P 500 has bounced back to levels seen at the January 2018 spike high, yet is valued more cheaply than it was 14 months ago.

Nov 16 2018

Correction Creating Values?

  • Nov 16, 2018

While the consensus view remains that October’s stock market rout was “healthy” and “overdue,” we think it was  more likely the first leg down of much larger decline. But it’s still worth reviewing the improvement in valuations that market losses and this year’s excellent fundamentals have combined to produce.  

 

Nov 07 2018

P/E Crash!!

  • Nov 7, 2018

While this year’s liquidity squeeze has yet to exact the toll we ultimately expect on the U.S. stock mar-ket, it has certainly contributed to a sharp compression in P/E multiples.

Jan 07 2017

An Obligatory Rant Over High Valuations

  • Jan 7, 2017

We remain cyclically bullish, but it would be intellectually dishonest to try to make a serious valuation case for the stock market here.

Oct 07 2015

Valuations: The Bad And The Good

  • Oct 7, 2015

Foreign valuations experienced nowhere near the expansion enjoyed by U.S. stocks during the latest bull market, but their cheaper valuations rarely seem to inoculate them from outsized losses during corrections and bear markets.