The Stock Market Is Even Worse Than You Think It Is
The P/E ratio of the S&P 500, based on the next 12 months of earnings, is down 17 percent this year.
Nothing good to see here.
Photographer: Drew Angerer/Getty Images
The stock market is no longer not just not great — it’s downright awful. In fact, after the 550-point plunge in the Dow Jones Industrial Average on Tuesday, 2018’s market meltdown, at least in terms of valuations, now ranks among the worst of the past few decades.
The price-to-earnings multiple of the S&P 500 Index, based on the next 12 months of earnings, has fallen 17 percent in 2018. That’s the third-biggest drop in valuations since 1991, which is as far back as Bloomberg data goes on that metric. That’s only 1 percentage point better than the 18 percent slide in valuations in 2008, during the financial crisis. The worst valuation drop was in 2002, when corporate profits and the economy, but not yet the stock market, were rebounding from the dot-com bust.