Market Hits New High… Too Richly Valued?


The DJIA closed over 17,100 points for the first time in history. Investors are generating brand new wealth never seen before. But what’s that doing to valuations?

The key stat is the P/E ratio. The higher the number the pricier the asset. According to Goldman Sachs operating earnings estimates, the S&P 500 has a P/E of 17 now. This is slightly above the average since 1925. But earnings are estimated to steadily rise. Starting in annually in 2015, the P/E drops to 15.8 then 15 and ends at 14.3 for the 2017 estimates.

So it looks like, if you can believe the estimates, that investors scared out of the markets might be losing a very large opportunity to participate in the world’s largest economy.

Remember that they’re usually bargains somewhere in the world. I’ve been finding some good deals in international indexes, smaller U.S. companies and “over-sold” countries like Russia. Don’t forget to have a smart allocation with many unique asset categories, including alternative bonds, all paying high income if possible.