Fund Picks for an Expensive US Stock Market

US equities look expensive on most traditional valuation measures, with the S&P 500 trading at a multiple of 25.7 times earnings

Fatima Khizou 6 June, 2017 | 3:37PM
Facebook Twitter LinkedIn

US equities have continued their upward trajectory in 2017, with the S&P 500 index registering a total return of 8.6% – the first three months of the year clocked its best quarter since the end of 2015. Technology stocks lead the market, as the sector delivered strong earnings and the highest growth rate in the S&P index.

Within this segment, Facebook, Amazon, Netflix and Google – the FANG stocks – were the strongest performers, returning an average of 15.1%. On the other side of the scale, the energy sector was the worst performing area of the market, sliding by more than 6% as investors started to question the effectiveness of the OPEC deal.

In terms of market capitalisation, small cap stocks, which were the standout in 2016, have lost momentum on the back of declining earnings and an elevated valuation. Overall, US equities look expensive on most traditional valuation measures, with the S&P 500 trading at a multiple of 25.7 times earnings. This level is well above its ten-year historical average of 16.4 times.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Fidelity America A-Dis-USD14.00 USD-0.01Rating
Franklin US Opportunities W Acc5.17 GBP0.52Rating

About Author

Fatima Khizou  is an Investment Research Analyst for Morningstar