Today’s Valuations

BELOW IS A LOOK at current market valuations:

  • At the end of 2023’s second quarter, the stocks in the S&P 500 were trading at a price-earnings ratio of 25.8, based on trailing 12-month reported earnings, making them overpriced by historical standards.
  • The S&P 500 stocks ended the second quarter at a cyclically adjusted price-earnings (CAPE) ratio of 31.1, versus a 50-year average of 21.3. CAPE compares current share prices to average inflation-adjusted earnings for the past 10 years.
  • As of 2023’s second quarter, stocks were at a 43% premium to the value of corporate assets. This measure of stock market value is known as Tobin’s Q.
  • U.S. equity real estate investment trusts posted strong gains in 2021, but tumbled in 2022 and eked out a small gain in 2023’s first six months. As of August 2023, equity REITs were yielding 4.1%, above the 2.6% recorded in December 2021, which was the lowest yield in the FTSE NAREIT index’s half-century history.
  • The benchmark 10-year Treasury note was yielding 3.83% as of June 30, versus 3.88% at year-end 2022. Based on the difference between that yield and the yield on inflation-indexed Treasurys, the financial markets expect inflation of 2.2% a year over the next decade.
  • At the end of the second quarter, high-yield junk bonds were yielding 4.1 percentage points more than Treasurys, down from 4.8 percentage points at year-end 2022.

Next: Asset No. 1: Stocks

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