SP 500 Remains Reasonably Valued

Dr. David Kelly and the JP Morgan research team publish a quarterly “Guide to the Markets” which I’ve always thought was an excellent 70-odd page summary of economics, capital markets, style boxes, and all manner of investment-related information in one package.

The attached spreadsheet below is my own crude way of tracking the Guide’s valuation matrix, which is a quick and very helpful synposis of the SP 500’s valuation at a glance.


If readers would look at the “standard deviation column” for each quarter, you can see that relative to long-term averages, the SP 500’s valuation metrics remain in a “normal” range.

Even all the nervousness about the FANG stocks (long all but Netflix), and the concentration in the top 5 – 10 names in the SP 500, which brings back memories of the late 1990’s today, however if you scrutinize the Nasdaq 100, the key index is valued at roughly 23(x) – 25(x) earnings, versus the 80(x) – 100(x) multiple from the late 1990’s.

Here is another fascinating graph by Bespoke published yesterday:

“Run of the Mill” Market Returns

Longer-term SP 500 returns remain well below average.

I do think we are a long way from a secular bear market in the SP 500 where we have to worry about long-term losses of capital which take years to recover.

No question, we will have corrections – in fact we are due for some real market “fear”, but sentiment is already less than exuberant, so that tempers corrections.

Thanks for reading.




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