S&P 500 Forward P/E Chart
Chart of the Week for June 1, 2018 - June 7, 2018
The Price-Earnings Ratio (P/E) of equity securities is widely used by market participants for security valuation. P/E measures the current share price of a security relative to its earnings. P/E is also referred to as the "price multiplier" because it shows how much investors are willing to pay for a security per one dollar of earnings. The chart above shows the P/E based on forward 12-month estimated earnings for the S&P 500 Index (SP 500), an index of large-cap securities that is a popular reference for equity market performance.
For the first 5 months of 2018, the forward P/E for the SP 500 has fallen -7.3% as earnings have risen faster than prices have. Earnings growth has been influenced by the tax cuts enacted in late-2017 and improving economic conditions, while equity prices were volatile during the first quarter and have stabilized somewhat since then. Some market watchers have noted that equities may be relatively more attractive than other risk assets, but caution that factors including rising interest rates, trade discussions, and the late stage of the business cycle all present concerns.
Posted by: sarah_oz@yahoo.com
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