Are Stocks Cheap?


Posted in: Economics, Stock Market, Thought of the Week

The S&P 500 has gained 163% (26% annualized) since early March 2009 – which almost mirrors the equity rally in the late 1990s. Consequently, many investors will speculate that we may be headed for another large sell off given that we are sitting at record highs for the S&P 500. However, this market is not the same as it was in the 1990s and has a much different story.

During the 1990s, the average price-to-earnings (P/E) multiple was 25x, and the average P/E since March 2009 is 15x. To put it simply, stocks are 35% cheaper on average today vs. the technology boom of the 1990s. If stocks are cheaper today, why are we sitting at record highs in the S&P 500? To find out, read this week’s Thought of the Week.

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As an Investment Advisory Representative working in conjunction with Global Financial Private Capital (GFPC) we are provided weekly thoughts on what is happening in the economy and the market.  Written by our investment committee at GFPC we find these thoughts to be informative and interesting.