SSO - The Dangerous Assumption Embedded In Today's P/E Ratios Part Deux
2023-03-15 22:32:00 ET
Summary
- After the painful decline in stock prices last year, many investors have clearly come to the conclusion that this now represents another terrific buying opportunity.
- The forward price-to-earnings ratio now shows the S&P 500 trades at a multiple of around 17, very near its average over the past two decades.
- If profit margins continue to fall over the course of this year, rather than reverse higher as expected, the denominator in those forward price-to-earnings ratios could decline dramatically, revealing the fact that equity valuations were never really all that reasonable in the first place.
For further details see:
The Dangerous Assumption Embedded In Today's P/E Ratios, Part Deux