Stock ValuationsSubmitted by Majerko Investment Management LLC on April 12th, 2018
One of the measures I look to when valuing the stock market (S&P 500) is the Price/Earnings (P/E) ratio. It is a good gauge to see how expensive or cheap stocks are, compared to historical averages.
The market has come a long way since that dark bottom in March of 2009, yet we are now pretty close to our 25 year average in forward P/E ratio valuations. What does the chart below tell me?
It looks to me that we are neither over-valued nor under-valued right now. So if we can continue to grow earnings, there should be more gains in the stock market in the long run.
I do not see much froth in the market as the recent correction has seemed to fix that problem. So as always, earnings are the key, and I see no bubble at this time.
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