Are Record Stock Market Highs the New Normal?

There is an argument gaining traction that equity markets should trade higher in a climate of lower interest rates and lower growth

Cherry Reynard 16 August, 2017 | 3:50PM

Valuations on equity markets are high by historic levels. A recent report by Goldman Sachs shows the forward P/E multiple of the S&P 500 is up by 80% since 2011, while the trailing P/E multiple is 22x, against a long-term average of 16.7x. That should make uncomfortable reading for equity market investors.

Lower bond yields mean you need to rethink asset valuations

However, there is an argument gaining traction that equity markets should trade higher in a climate of lower interest rates and lower growth. The growth they provide is more valuable. While investors should always be wary of the phrase ‘this time it’s different’ – might it be?

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About Author

Cherry Reynard

Cherry Reynard  is a financial journalist writing for Morningstar.co.uk.

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