Stocks Can Get Cheaper as They Go Up
One of the biggest questions clients are asking right now is “Are stocks expensive?” And the short answer is yes – based on historical comparisons, valuations on U.S. stocks are definitely high. According to research from the Leuthold Group, as of 12/31/2016 the S&P 500 trailing price to earnings (P/E) ratio was in the 90th percentile (meaning stocks have only been more expensive 10% of the time) of valuations going back to 1920. Does that mean stock prices need to fall in order to get back to more reasonable valuations? Not necessarily…