The U.S. market is extremely overvalued now by almost any measure, writes MktwHulbert
That would be worth keeping in mind at any time, of course, but especially now with the major market averages significantly off their late-April peaks. If current valuations were reasonable, then we could count on them to provide a safety net below this market.
I disagree. Though valuations did improve between the market’s late-September and late-April peaks, the improvement was so slight as to barely improve equities’ outlook. Consider perhaps the most popular valuation measure: The price/earnings ratio. At the S&P 500’s late-September peak, the P/E ratio based on trailing 12 months as-reported earnings stood at 22.5. At its late-April peak, in contrast, it stood at 21.9 — less than 3% lower.
Notice that the market at that high was more overvalued than it was at anywhere between 86% and 100% of past bull market peaks . The overwhelming message: Don’t look to valuations to cushion any decline.
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