With growing talk of a new secular bull market, it’s time to take a look at valuation history. While it’s true that “anything can happen” in financial markets, it seems unlikely that a new secular bull market will lift off from a P/E multiple of 17x. It seems more likely, based on prior experience, that price will fall (or earnings rise) before a decade-long multiple-expansion can occur. With that said, it should be noted that SPX could easily run to 1800 before the traditional 20x ceiling is reached. And with Doctor Bernanke at the switch, the old rules are – at least temporarily – in question.
Technical Perspective – U.S. Equities: Does Valuation Matter?
About the Author: Mark Ungewitter
Mark Ungewitter is a Senior Vice President & Investment Officer at Charter Trust Company. He was formerly Director of Portfolio Management at Investors Bank and Trust in Boston, Massachusetts. He holds an M.S. from Bentley University and a B.S. from Massachusetts College of Liberal Arts. He is a member of the American Association of Professional Technical Analysts.