CIF - Equity Valuations Have Improved Dramatically
With the price plunge which started in early October, the P/E ratio of the S&P 500 (using Bloomberg's measure, which is based on 12-month trailing earnings from continuing operations) has fallen from a high of 23.3 last January to 16.48 currently. To put this into perspective, consider that today's P/E ratio is below the 60-year average of this measure (16.9), and it is about equal to the market's P/E ratio just prior to the onset of the Great Recession. Relative to the current yield on 10-year Treasuries (2.79%), stocks now boast an earnings yield (the