After eye-popping gains in the stock market over the past three quarters, price-to-earnings ratios have soared.
Indeed, since the election in November, the S&P 500 has surged 11.4%. And if clients were prescient enough to buy the index in June, they would be looking at an 18% gain.
But has the pendulum swung too far? To be sure, P/E ratios have surged even higher, but using history as a guide, equity prices have gotten ahead of corporate earnings. The S&P 500 P/E stands at 24.9; the historical average from 1960 is 16.8.