US Stocks Cheap on 12 of 15 Historical Valuation Measures

Is the S&P 500 cheap or expensive relative to historical valuation metrics?

The bubble talk seems to be mostly subjective and depends mainly on who is doing the talking. Someone who’s missed the run-up is more likely to call it a bubble and someone who is first chasing and buying in now is more apt to dismiss the bubble talk out of hand. It’s funny how our opinions depend so much upon what suits our lives and careers best.

The bubble talk is also subjective according to what sector or corner of the market one might be looking at specifically. Pointing to Netflix and Tesla and all the IPOs and screaming “STOCK MARKET BUBBLE” isn’t exactly rigorous. But ignoring the over-the-top bullish sentiment surrounding US stocks these days probably isn’t healthy either. I’m certainly not.

But let’s get back to concrete measures of valuation for a moment…

Savita Subramanian put out a Valuation Cheat Sheet yesterday looking at sectors and industries individually and the overall market as well.

The best chart from the research piece looked at the S&P’s current valuation based on 15 popular measures. It found that on most of these, stocks are still cheaper than they’ve been historically (click to embiggen the chart)…

S&P 500: cheap or expensive?

In addition to the metrics contained in this report, in August we examined the S&P
500 across every valuation metric we could think of—we found 15—to gauge
whether US stocks still looked cheap vs. history. Here we provide an update of this
analysis. Today, 12 of the 15 metrics suggest the S&P 500 is trading below
historical average levels, while the trailing P/E and P/OCF suggest the S&P 500 is
trading slightly above average levels. Only the Shiller P/E—which bases normalized
earnings on the last ten years, when we underwent the biggest profits recession in
history driven by excessive leverage—suggests the market looks very stretched.

cheap

 

Source:

Lofty valuations at the Growth and Yield extremes
Bank of America Merrill Lynch Equity and Quant Strategy | United States
11 December 2013

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. montre replique commented on Jan 16

    … [Trackback]

    […] Find More Information here to that Topic: thereformedbroker.com/2013/12/12/us-stocks-cheap-on-12-of-15-historical-valuation-measures/ […]

  2. pistol for sale commented on Jan 18

    … [Trackback]

    […] Find More Information here to that Topic: thereformedbroker.com/2013/12/12/us-stocks-cheap-on-12-of-15-historical-valuation-measures/ […]

  3. tangerine account log in commented on Jan 18

    … [Trackback]

    […] Find More here to that Topic: thereformedbroker.com/2013/12/12/us-stocks-cheap-on-12-of-15-historical-valuation-measures/ […]

  4. wigs commented on Jan 19

    … [Trackback]

    […] Find More Info here on that Topic: thereformedbroker.com/2013/12/12/us-stocks-cheap-on-12-of-15-historical-valuation-measures/ […]

  5. bandar 77 commented on Jan 23

    … [Trackback]

    […] Read More Information here to that Topic: thereformedbroker.com/2013/12/12/us-stocks-cheap-on-12-of-15-historical-valuation-measures/ […]

  6. binance site commented on Jan 24

    … [Trackback]

    […] There you can find 7121 additional Info on that Topic: thereformedbroker.com/2013/12/12/us-stocks-cheap-on-12-of-15-historical-valuation-measures/ […]