This Valuation Measure Shows Stocks at Same Level as During Dot-Com Peak

Santa Rally Eludes European Stocks

It’s rare the S&P 500 trades this rich to revenue.

Four straight weeks of gains have pushed its price to 2.3 times sales, a level it hadn’t touched since the waning days of the Internet bubble. Even then it was far from standard: the S&P 500 traded at or above this valuation on 27 days in 1999 and 2000, data compiled by Bloomberg show.

Like many valuation indicators, price-to-sales has inflated during a year when stocks reached a record on average once every four days, though other measures such as price-to-earnings and price-to-book are still a ways away from their dot-com zenith. To a skeptic, that’s because there are fewer ways of juicing the sales line.

“You can’t play around with sales number, and the fact that the number is this high may be a good reason to stop for a second and think,” said Matt Maley, a strategist at Miller & Tabak. “In retrospect, everyone knew that the valuations were stretched in 1999, but no one wanted to do anything about it. Fast forward to 2018, and even though the stocks can keep on rising, a market correction of about 10 percent is overdue.”

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