The S&P 500 is sitting at new all-time highs. So, one would think that it’s also as expensive as it has ever been. However, that is not the case. A popular metric tracked is the markets forward 12-month P/E ratio (Price to Earnings Ratio). A higher number means that you are paying a higher price per share for each dollar of earnings. As of 10/31/21, the forward P/E is at 21.4x. Compare that to August 2020, when the forward P/E was at 23.6x. So, even though the S&P 500 is up over 27% since the end of August 2020, it is actually cheaper now then it was then.
Keep in mind that the current P/E is still higher than the long-term average and could certainly come down further. However, as long as the E (Earnings) is growing, there can still be a lot more gains left in this bull market.
If you have any questions about the current state of the market or would like to evaluate how your portfolio is currently positioned. Please reach out to us at AskFreedom@freedomfamilyoffice.com.