Lately, it's rare that a day goes by, it seems, without the benchmark stock indexes setting fresh all-time highs. And while this lofty perch certainly feels scary to most investors, the earnings multiples that this six-month rally has been built upon remain modest and well below previous peaks.
In fact, despite weak earnings guidance for the second quarter (where 79% of the forecasts given were negative or below expectations), FactSet's senior earnings analyst John Butters says if you use full-year price-to-earnings ratios, equities are still relatively cheap.
"I think you can look at it two ways," Butters says in the attached video. "If you're on the bullish side, PE ratios are nowhere near record levels, but if you're more bearish, you can say we are now above the trailing five- and 10-year averages."
Specifically, he says the PE for the S&P 500 is currently at 14.3 times estimated full-year earnings, compared to its five- and 10-year averages of 12.9 and 14, respectively, and peak PEs of 19 or 20 times earnings at the height of the dot-com bubble in the late 1990s and early 2000s.Read More »from High Hopes, High Prices and Reasonable Valuations Seen for 2nd Half