S&P 500’s P/E Signals Earnings Optimism and ‘Huge Dark Asterisk’
- S&P 500 trades at 21-times average earnings over last decade
- Banks set to kick off reporting season in just under two weeks
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As the worst quarter for stocks since the financial crisis finally ends, here’s something to ponder: Even after the drubbing, equities aren’t pricing in a particularly disastrous outcome in terms of earnings.
It’s testament to how high valuations were back in February, at the start of a sell-off that has erased $7 trillion from share prices. At their levels now, stocks are acting as if corporate profits will hold up in a way that isn’t consistent with what usually happens in a serious recession.