The Market Isn't as Expensive as You Might Think

Does it seem like a crash is around the corner? Is it hard to feel greedy? [Chaikin PowerFeed]( The Market Isn't as Expensive as You Might Think By Vic Lederman, editorial director, Chaikin Analytics Does it seem like a crash is around the corner? Is it hard to feel greedy? And have you seen a chart of the S&P 500 Index lately? On Friday, the S&P 500 officially closed at a new all-time high of nearly 4,840. That narrowly beat the previous all-time high of about 4,818 in January 2022. And it has some investors fearing the worst. This happens during every cycle. The broad market chart starts looking a little lofty. And some investors run for cover, thinking a crash is imminent. I get it... There's probably a little bit of that type of investor in all of us. New highs are uncharted territory. The market hasn't been there before. And neither have we. At least that's what it feels like. But there's a fundamental problem with that kind of thinking... After all, the market has made plenty of new highs over the years. And you might find some of the details about the current setup surprising. Let's take a closer look at that today... Recommended Links: [Controversial New Announcement]( Our friends at Stansberry Research predicted the collapse of General Motors... General Growth Properties... and announced that "Fannie Mae and Freddie Mac are going to zero" just before they plummeted during the 2008 crisis. Today, they're sharing yet another controversial opinion. [Click here to learn more](. ['I Found the Answer to Retirement']( A man from New York came forward with his unique story of how he retired early and worry-free WITHOUT stocks... thanks to ONE single idea that anyone can use. Now he sees 16%-plus annual returns with legal protections... and he NEVER has to worry about another market crash again. [Get the full story right here](. First, there's no question that the broad market chart is looking a little lofty. That's especially true if you choose the right time frame to look at. I'm sure you've seen charts like the one below before. They're set up with a long time frame and tend to look like they couldn't possibly be any more extreme... [Chaikin PowerFeed] But there's a big problem with that perspective... It doesn't tell you much of anything about the market other than that it does indeed go up over time. But there are other ways we can look at it. Today, the market trades at a price-to-earnings (P/E) ratio of about 24.4. Remember, this measure tells us how much companies are earning compared with what the market values them at. So, we can use this ratio to tell us if the broad market is "expensive," or if investors are overpaying for the earnings that companies are bringing in. Now, today's P/E ratio of 24.4 might sound high. But keep in mind that over time, the average P/E ratio of the S&P 500 has crept up. Going back to the 1800s, the average P/E ratio is roughly 16. Of course, astute readers will immediately observe that the S&P 500 didn't come into existence as a 500-stock index until the late 1950s... And if you look at the "modern era" from the 1970s and beyond, the average P/E ratio is closer to 20. That's not far off from where we are today. Still, all of this is a little "in the weeds." We can look at it more simply. Again, the S&P 500 currently trades at a P/E ratio of about 24.4. That's around where it traded in 2016. And as you can see in the chart above, the market went on to hit new high after new high (of course, with some pullbacks along the way). 2016 didn't seem like a particularly crazy time in the markets. That's the point. Today, the market is making new highs. And for many investors, that feels expensive. Now, maybe you think investors just generally pay too much for the companies they buy these days. That's fine. But the point still stands. If you weren't reaching for the panic button in 2016, you probably shouldn't be today. I said it [earlier this month](... Don't fear new highs. It doesn't automatically mean a crash is imminent. Good investing, Vic Lederman Market View Major Indexes and Notable Sectors # Hld: Bullish Neutral Bearish Dow 30 +0.39% 13 15 2 S&P 500 +0.21% 162 257 79 Nasdaq +0.13% 51 37 12 Small Caps +2.14% 708 922 290 Bonds +0.61% — According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks remain Bullish. Major indexes are mixed. * * * * Sector Tracker Sector movement over the last 5 days Information Technology +4.58% Communication +1.59% Financial +1.3% Industrials +1.08% Discretionary +0.05% Health Care -0.32% Materials -1.17% Staples -1.51% Real Estate -1.67% Energy -2.67% Utilities -4.19% * * * * Industry Focus Oil & Gas Equipment Services 0 7 23 Over the past 6 months, the Oil & Gas Equipment Services subsector (XES) has underperformed the S&P 500 by -18.00%. Its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #21 of 21 subsectors. Indicative Stocks [rating] CLB Core Laboratories In [rating] DO Diamond Offshore Dri [rating] VAL Valaris Limited * * * * Top Movers Gainers [rating] VFC +4.96% [rating] ALB +4.88% [rating] SNPS +4.72% [rating] JBHT +4.46% [rating] WDC +4.07% Losers [rating] ADM -24.2% [rating] GILD -10.15% [rating] BG -4.23% [rating] CCL -3.98% [rating] AMD -3.47% * * * * Earnings Report Reporting Today Rating Before Open After Close DHI, PCAR, SYF, VZ STLD IVZ, JNJ, LMT, PG, RTX, VLO CSX, NFLX HAL BKR No earnings reporting today. Earnings Surprises [rating] BRO Brown & Brown, Inc. Q4 $0.71 Beat by $0.09 [rating] BOH Bank of Hawaii Corporation Q4 $0.46 Missed by $-0.54 [rating] AGYS Agilysys, Inc. Q3 $0.35 Beat by $0.09 * * * * You have received this e-mail as part of your subscription to PowerFeed. If you no longer want to receive e-mails from PowerFeed, [click here](. You’re receiving this e-mail at {EMAIL}. 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