The S&P 500 has rallied for three years in a row, without a significant correction. This puzzles many observers who consider equities to be overvalued. Many experts predicted a correction (or worse) this year – after predicting one last year which has not happened – so how high is the S&P 500 valuation, after all?
The following article is presented by Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and the FREE Market Intelligence Report newsletter (register here; sample here). This paragraph must be included in any article re-posting to avoid copyright infringement.
- The P/E Ratio: Its Strengths and Limitations
- Be Careful: The P/E Ratio Can Steer You into a Financial Disaster
We can also see that:
- The P/E ratio was generally lower in the 1980’s than today’s P/E of 17.7
- It was generally higher in the 1990’s than today
- Today’s P/E is close to the average in the past 10 years.
…While data may change at any time, our models expect strength in U.S. equities, [and that of the S&P 500, in particular,] to continue.
We recommend that tactically-minded investors:
- overweight U.S. equities and underweight bonds…[and]
- allocate the maximum amount allowed by an investor’s risk tolerance (or institution’s investment policy) to core large-cap U.S. equities.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://modelcapitalmgmt.com/how-high-is-equity-valuation/ (© 2014 Model Capital Management LLC. All rights reserved.)
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